Members of defunct transit system accused of fraud by bankruptcy court trustee
By Kathryn Reed
Former members of South Tahoe Area Transit Authority, Tahoe Regional Planning Agency, and the law firm of Feldman, Shaw & McLaughlin received more bad news this month from the U.S. Bankruptcy Court in Reno.
David Thompson, the federal bankruptcy trustee, filed a complaint against STATA’s member agencies in which he states that STATA’s members “sought to hinder, delay, and defraud” MV Transportation’s collection of funds that STATA owed MV by depositing more than $1 million of STATA’s funds in a Feldman Client Trust Account.
STATA failed to list the cash in the Feldman Client Trust Account in its bankruptcy filing. Mike McLaughlin was the attorney for STATA.
While transit officials on the South Shore fight over millions of dollars, older bus riders in South Lake Tahoe sit in the sun or snow, depending on the season, without a shelter at BlueGo bus stops. Photo/LTN
The trustee report dated Sept. 7 says that trust account was used to pay TRC, the operator of the BlueGo bus system that replaced MV.
The complaint also states that STATA’s board of directors participated in a scheme to wrongfully transfer STATA’s assets to the Tahoe Transportation District in order to avoid paying MV the money the Fairfield-based company was owed. It also says the records are so poorly kept that it is hard to know what money was transferred when. Depending on when the transfers were made, “they are fraudulent,” Thompson writes.
TRPA’s staff recommended STATA hire MV Transportation to provide transit services – primarily the BlueGo buses. The STATA board did so in November 2008.
According to the trustee, STATA immediately asked MV to provide a higher level of service than STATA could afford. Almost immediately STATA had trouble paying MV for the services it provided.
According to the federal bankruptcy trustee, STATA owed MV approximately $3 million by June 2010. That is the month STATA terminated its contract with MV Transportation. Unwilling to pay MV the money it was owed, STATA filed for bankruptcy in September 2010, disbanded by the end of that year and essentially merged with Tahoe Transportation District.
In the complaint, the trustee states that the participation agreement requires member agencies to contribute additional funds in the event of any budget shortfalls.
The trustee’s complaint asks the court to approve specific judgments against member agencies and others as follows: Feldman, Shaw & McLaughlin, $1,035,197; Tahoe Transportation District, $142,000; South Lake Tahoe, $193,779; Heavenly Mountain Resort, $558,336; Harveys, $26,085; MontBleu, $6,133; Horizon, $3,800; Douglas County, $20,000; and Transit Resource Center of Nevada, $692,669.
In reviewing the court documents, it appears the trustee also asked the court to approve a judgment against all of STATA’s members including the El Dorado County and the TRPA in the amount of $2.29 million, plus interest for which all members would be jointly responsible.
El Dorado County had settled its case with MV, but the trustee is dragging that public body back into the mix by questioning whether that settlement agreement was legal.
No mention of the trustee report was made during the open session of TTD’s Sept. 14 meeting, though it was listed as a closed session item.
Ironically, at that meeting John Busskohl with Keolis Transit America gave a report about how things have been going with BlueGo since taking over the operations July 8, 2011.
Busskohl said when his firm took over 60 percent of the fleet was out of service, but that has since been rectified. Three terminals instead of one are being used. An automatic vehicle location system has been installed. This summer’s East Shore Express was deemed a success.
Financials, according to TTD Executive Carl Hasty, are positive. The financials for the past year will be revealed and discussed at the October TTD board meeting.
As for the STATA case, the defendants now have an opportunity to respond to the charges leveled by the court trustee. U.S. Bankruptcy Court Judge Gregg Zive in November could make a decision to dismiss the case or send it to trial.
To bad the new operator has to deal with the bad reputation of the prior operators. MV had great service the 1st summer during July and August. The auto bus locator has to have gone a long ways in overseeing bus route timing. The last 2 years or so I notice schedules being kept much better. If public transit is to be a significant player in regional functionality (local, tourist,ect..), the new operator has shifted to better reliability. When MV was the operator, less than 15% of revenue came from the fare box. Might be great for everyone if there is no fare to get things more fluid.
It looks like the only venue where we can get sunshine in local gov. affairs is federal court.
We told them MV was trouble but NO they chose them anyway..ATM was the best service we ever had. Yes Lou your right federal court is the way of the future.
Would like to say something about Kae’s photo of While transit officials on the South Shore fight over millions of dollars, older (and disabled) bus riders in South Lake Tahoe sit in the sun or snow, depending on the season, without a shelter at BlueGo bus stops. TTD has tried to put up shelters only to have some businesses say not on our property.
Be Honest, The bus system has sucked for many years,plus no one rides the damn thing anyway.
We need a electric trolley that runs to one end of town to the other with no operator other than a robot with good software,no medical bills,perks to pay. stops at just so many stops and it’s up to the person to be there or be square.
Hang ups, aren’t you one of those that advocate less government (or if memory serves what you have described as liberal socialist that have ruined the state, AND the country)? And yet here you advocate the city and county to provide an electric trolley system? I applaud your PROGRESSIVE thought process, even if your idea is missing a bit of reality!
HangsUpsFromWayBack–I and many disabled and Seniors ride the bus everyday also get a life electric trolley in 10 feet of snow OK..And ATM was great!