Friday 17 January 2020

Russia's VEB owns Irish lessor suing Boeing for at least €665m

Dublin-based Timaero part of Russian state-owned bank, whose ex-boss met president Donald Trump's son-in-law

A Boeing worker near a 737 MAX jet (Elaine Thompson/AP)
A Boeing worker near a 737 MAX jet (Elaine Thompson/AP)
John Mulligan

John Mulligan

Timaero, the Dublin-based aircraft lessor suing Boeing for at least $740m (€665m) in relation to 22 orders for its troubled Max jet, is owned by controversial Russian state-owned bank Vnesheconombank (VEB), it has emerged.

VEB, previously described by the 'New York Times' as being "intertwined with Russian intelligence", was at the centre of a political storm in 2017. Its then boss, Sergei Gorkov, had a meeting in New York with Donald Trump's son-in-law, Jared Kushner, in December 2016, fuelling speculation about Russia's involvement in the US presidential election. Mr Gorkov is a graduate of the Kremlin's FSB intelligence agency, formerly the KGB.

Timaero Ireland signed an agreement with Boeing in January 2014 to buy 20 Max aircraft. In 2016, Timaero converted two Boeing 737-800 orders to Max orders.

Max jets have been grounded all over the world since March this year, following two fatal crashes linked to one of the aircraft's software systems. "The 737 Max aircraft contracted for between Boeing and Timaero are now either worthless or seriously diminished in value," the Irish lessor has claimed in an Illinois court. Boeing has its headquarters in Chicago.

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Timaero was originally due to take delivery of four Max jets by this week, but has only received two so far.

"Boeing's delay in the delivery of aircraft to Timaero in breach of the aircraft delivery schedule agreed to by the parties is the result of Boeing's fault and negligence in designing the aircraft with a defective flight control system that it did not properly test and analyse, and for which it provided incorrect and incomplete analysis to the FAA [Federal Aviation Administration] as part of its certification," Timaero has alleged in its lawsuit.

Timaero's directors are Alan O'Driscoll of Dublin law firm Flynn O'Driscoll, and accountant Sean McCreery, who previously held senior roles with Larry Goodman's ABP Food Group and runs a corporate services business.

"At the time Timaero entered into its agreement to purchase the 737 Max aircraft, Boeing represented that the 737 Max was an airworthy and safe aircraft, and that it had been designed in compliance with aviation regulations," Timaero's complaint alleges. "However, Boeing made false representations to the FAA during the certification process of the aircraft."

Boeing declined to comment when contacted yesterday.

Timaero has also claimed that Boeing refused to refund advance payments it made to the aircraft manufacturer that were given in accordance with the purchase agreement between the pair.

Accounts filed with the Companies Registration Office in Dublin for Timaero show that it made $316m in advance payments to an aircraft manufacturer, understood to be Boeing, between November 2013 and the end of 2018.

The accounts also stated that Timaero was in talks with the aircraft manufacturer to "either apply the amounts currently advanced to purchase other aircraft for the company or other members of the group or to recover the amounts advanced".

They also note that Timaero took delivery of two Boeing 737 jets last year, and that both aircraft were subsequently sold to a third party for a total gain of $92,038.

Another section of the accounts notes that two jets that were taken delivery of were sold by Timaero for $107.9m in 2018, for a gain of $2.1m.

The cheapest Max aircraft, the Max 7, has a list price of $99.7m.

"Boeing's acts and conduct as averred herein have caused substantial, irrecoverable and irreparable consequential damages to Timaero's business reputation and goodwill, and have caused the resulting loss in the value of Timaero's business which is continuing and has constituted an ongoing concern for Timaero," the Irish company said in its complaint lodged in court this week.

Timaero said it is seeking a number of separate damage awards and demanded a jury trial.

It has requested an award for "in excess" of $185m to compensate it for "damages proximately caused by Boeing's wrongful acts and omissions".

It also wants an award of punitive damages for Boeing's alleged "fraudulent acts" that will be "at least" three times the compensatory damages.

It also wants the purchase agreement between the two companies to be cancelled.

Boeing announced this week that it will suspend production of the Max from January. "That same day, Stanley A Deal, president and CEO of Boeing Commercial Airplanes, wrote to Timaero to inform it of Boeing's decision to suspend production and delivery of Timaero's aircraft until a time uncertain," said the Irish firm in its complaint.

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