Jet Blues

Why are corporate jets always getting CEOs in trouble?

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Citigroup executive Todd Thomson resigned last week amid a cloud of scandal-sniffing from news media and bloggers over Thomson’s mysterious relationship with business-news fixture Maria Bartiromo. One particular episode seems to have gotten Thomson in trouble: When traveling from China back to New York, he reportedly bumped Citigroup colleagues from a company jet so he could fly home privately with Bartiromo. His colleagues—o, the horror!—had to fly commercial. A 2004 “Moneybox” by Daniel Gross, reproduced below, explains why private jets are often so prominent in corporate scandals.

The trials of Martha Stewart,former Tyco executives Dennis Kozlowski and Mark Swartz, and Adelphia’s Rigas clan have shown conclusively that, yes, the rich are different than you and me. They spend thousands of dollars on shower curtains. They get early stock tips. And they don’t fly commercial. The trials have confirmed that the most important perk of all, the perk that really separates them from us, is the private jet.

Private aircraft have played a role in virtually every recent story of corporate entitlement and corruption. While her jet was refueling in Texas en route to a Mexican resort, Martha Stewart made a fateful phone call to Douglas Faneuil, which was apparently overheard by her friend, Mariana Pasternak. Jurors in the Tyco trial learned that executives cruised around the country in the company’s 13-plane air force.

And just when jurors in the Rigas trial get over their outrage about one private jet excess, the prosecutors bring up another. So far, jurors have learned that:

  • Every year Adelphia’s shareholders effectively spent $6,000 for a jet to deliver a Christmas tree to the New York City home of one of founder John Rigas’ daughters. (In 2001, when the first conifer was deemed too stubby, a second one was delivered, also by jet.)
  • John Rigas took a company plane to Kenya on a safari.
  • Son Tim Rigas, in what seems to have been an unsuccessful attempt to seduce actress Peta (La Femme Nikita) Wilson, allowed her to fly on company planes several times in 1999 and 2000.

Perhaps prosecutors are focusing on the use of jets because it is the privilege most likely to stir up resentment among juries. It’s even more infuriating than accounting chicanery or $2 million birthday parties in Sardinia. Most jurors couldn’t fathom having—or wanting—a $6,000 shower curtain. But many of them probably have endured the hellish experience of flying Delta out of La Guardia airport. Hopping a Gulfstream IV out of Teterboro is something very few jurors have done but that all of them would surely want to. They appreciate that executives might be so attached to this perk that they would commit fraud to keep it. Wouldn’t you commit a crime to avoid waiting in another Southwest check-in line?

Prosecutors may also recognize that the private jet has been a key, perhaps the key, to the creation of an elite executive class. Time was, flying on a plane was a democratic experience. CEOs could do no better than first class. Today, when salespeople who log tons of frequent-flyer miles routinely fly in the front rows, first class is second class. And even if you’re seated in first class, you still have to endure the indignity of removing your shoes and belt in public. Commercial flyers—no matter how wealthy they are—remain tethered to airline schedules, are subject to inevitable delays, and assume the risk of being seated next to screaming babies.

By contrast, flying on private jets is a breeze. You drive directly onto the tarmac at an uncrowded aviation field and leave when it suits you. Delays? There are no delays. And of course, it’s safer, or that’s what executives pretend. In the wake of 9/11, companies have tended to justify the use of private aircraft by top executives on security grounds.

Once you’ve gone private, it’s very difficult to go back. Such is the allure of private planes that not even Warren Buffett, the famously frugal founder of Berkshire Hathaway, could resist. He enjoyed his experience with the fractional jet ownership company NetJets so much, he bought the company.

There’s no evidence that Peta Wilson succumbed to Tim Rigas’ charms because of the size of his plane. Business journalists are more easily seduced. The classic Fortune or Business Week CEO puffer starts with the reporter sitting on the corporate jet with Carly Fiorina or Buffett. Offering the plane ride is a brilliant move by public relations executives. Journalists are more excited about logging a few hours on the jet than with logging a few hours of face-time with the boss.

For executives, flying off the grid has become a major obsession. Former Tyco CEO Kozlowski may not have known his own Social Security number, or how many options he received in 2001. But had he been called to testify, Kozlowski surely could have rattled off every plane in Tyco’s fleet.

Perhaps the most telling anecdote about private jets comes from the best of the books about Enron, The Smartest Guys in the Room.It finds Enron Chairman Ken Lay working intently in his office. Enron’s stock is plummeting. Serious questions are being raised about Enron’s viability. And what is Lay doing? He is carefully examining fabric swatches for Enron’s newest plane. Lay may plausibly claim to have known nothing of the Raptor partnerships that torpedoed the company he built. But nobody—nobody—will ever accuse Lay of not knowing if the plane’s interior was brown leather or black.