One of the bidders for bankrupt Hawaiian Airlines was arrested his week on US federal charges of perpetrating a fraudulent scheme.


Paul Boghosian, 50, who holds the controlling stake in Hawaiian Investment Partners Group LLC, was arrested in St. Louis by FBI agents.


Hawaiian Investment Partners Group, represented by Boghosian's partner, airline pilot Robert Konop, submitted one of the two competing bids for Hawaiian Airlines, which is in Chapter 11 bankruptcy.


According to a federal complaint unsealed Wednesday, Boghosian misrepresented his ability to bring in USD 300 million to fund the airline's reorganization plan. Also, Boghosian tried to bribe an FBI undercover agent who was posing as a hedge fund manager, with USD 500,000 for a loan of USD 2.5 million, according to David Kelley, the U.S. attorney for the Southern District of New York.


The arrest comes at a time when the US Bankruptcy Court for the District of Hawaii is considering petitions by airline Trustee Joshua Gotbaum and Hawaiian Holdings Inc to disapprove the "Konop" plan. In court proceedings last week, depositions revealed that Hawaiian Investment Partners didn't have any financing in place. Judge Robert Faris is expected to consider the petition this week.


"I think this makes it clear that there is only one plan of reorganization for Hawaiian Airlines," said Gotbaum.


Boghosian, in his 11 November 2004 filing with the bankruptcy court, indicated that Hawaiian Investment Partners would provide at least USD 200 million in new equity and USD 100 million as a line of credit to the airline. As proof of funds, Boghosian and others allegedly submitted affidavits to the court that indicated he could get USD 500 million from E&M Trust.


Earlier this year, Boghosian, a resident of St. Louis, met with an FBI agent posing as a hedge fund manager. According to the federal complaint, Boghosian wanted a USD 2.5 million loan from the agent to cover legal expenses relating to Hawaiian's reorganization plan and USD 200 million to cover the equity funding under the plan.


The complaint also states that Boghosian admitted to the FBI agent that the affidavits he submitted to the bankruptcy court were bogus.


Following the arrest, three attorneys representing Boghosian's company filed to remove themselves as counsel for the bankruptcy proceedings.


Boghosian will be tried in federal court on two counts, for committing bankruptcy fraud and offering a commercial bribe. Each count carries a maximum penalty of five years in prison.


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