East Side player Gary Fears and his diverse business associates are betting that his military aviation business finally takes off. Whether it will fly is still up in the air.

By C.D. Stelzer

First published at focusmidwest.com in May 2010.

 

“It’s interesting that the guys who came here to help move the plane actually were Russian nationals,” says Cheryl Hill, a prosecutor in Marquette, Michigan.

Hill is referring to a gargantuan Soviet military aircraft worth millions of dollars that has been stranded for the better part of the last year at a former U.S. Air Force Strategic Air Command base in the Upper Peninsula of Michigan.

The spring thaw has melted the snow that accumulated around the aircraft over the winter, but mysteries surrounding its presence at Sawyer International Airport remain.

A fuel-leaking Cold War relic, the 94-ton behemoth has been the subject of both curiosity and consternation in Marquette since it touched down in July. Almost immediately, five members of the Ilyushin IL-78’s nine-man Ukrainian crew were deported for visa violations.

Hill, the local official charged with interim custody of the plane, recalls that one of the foreign-born aviators dispatched by the U.S. Customs Service to move the plane off the runway told her that he had flown the same aircraft during the Soviet Union’s war in Afghanistan in the 1980s. She mentions the coincidence as an aside, her prosecutorial inquisitiveness piqued more by the plane’s flight plan from last summer.

“I think that the more interesting question is, what were they going to do with it in Pakistan?” Hill says. “Were they running guns? Were they running drugs? Were they running people? You could drive tanks in there.”

The prosecutor’s suspicions raise a litany of other issues regarding accountability and transparency in the increasingly privatized war on terror, including the extent of U.S. military intelligence involvement, the veil of secrecy enveloping de facto covert operations, the purposes of such clandestine actions and who ultimately is profiting from the expansion of the wars now being waged in Afghanistan and Pakistan.

The covert nature of the aircraft’s mission and those involved in carrying it out would never have come to light if not for a dispute over a maintenance bill.

Victor Miller, owner of Air 1 Flight Services of Sherman, Texas, filed suit against Air Support Systems LLC in June 2009, alleging that the company owed more than $70,000 in maintenance fees accrued during the two-anda-half years the plane was mothballed at the North Texas Regional Airport. After the Ukrainian crew took off with the plane the next month, it was grounded in Michigan, as a result of a restraining order, before it could leave U.S. airspace.

The registered owner of the plane is Gary R. Fears, a former Downstate Illinois powerbroker who now resides in South Florida. Fears dismisses the imbroglio over the plane as much ado about nothing.

“The whole thing was a huge misunderstanding,” says the 63-year-old Fears, who maintains his corporate address at his lawyer’s office in St. Louis County, Missouri.

The leaseholder of the plane is North American Tactical Aviation Inc. (NATA), a corporation with the same Wilmington, Delaware, address as Air Support Systems LLC, a Fears-owned company with one asset: the grounded plane. That the corporations share the same Delaware incorporation address could easily be attributed to coincidence, but bankruptcy records filed on behalf of Air Support Systems in St. Louis last fall provide more details as to who invested money in the aircraft or lent money for its purchase.

The outstanding creditors listed in the filing include a private mercenary group, a shadowy front company in Gibraltar and an Illinois gambling executive with alleged ties to the Chicago mob. On October 23, a judge in Marquette County, Michigan, ruled in Miller’s favor and awarded him the plane as payment for the unpaid debt. To prevent the tanker from being taken, Fears countered by filing for Chapter 11 protection for Air Support Systems on October 28 in federal bankruptcy court in St. Louis.

“That stayed all of the action,” says Hill, the Marquette County prosecutor. On Dec. 17, Fears reversed his legal strategy and had his St. Louis bankruptcy attorney dismiss the case he had filed less than two months earlier. In March, the Michigan court’s ruling was upheld.

The decision is the latest twist in the bizarre legal dispute. The latest Michigan court ruling follows a decision by the Department of Homeland Security to release the plane. Miller could not be reached for comment, but Fears maintains that he is still the legitimate owner.

Buying a foreign military aircraft is not like other business transactions. Before Fears could get his hands on the IL-78, the federal government had to allow its importation. North American Tactical Aviation, the shadowy corporation that leased the plane from Fears after he purchased it, initially obtained permission to bring the plane to the United States. It is also the company involved in the failed effort to fly the plane to Pakistan last summer.

“I’m told that NATA [North American Tactical Aviation] had a contract to take the plane to Pakistan in support of the allied efforts there,” Fears says. He emphasizes that the mission had been officially sanctioned. “We bought the plane from the Ukrainian government. The Air Force wrote a letter in support of the importation of it, saying they thought the plane had potential use in support of U.S. training requirements. The refueling system on that airplane is common to many, many other countries.

“I view it as a logical and good thing to support the [war] effort,” says Fears. “It’s not to say that I agree politically with all efforts. I thought the Iraq war had a noble purpose and was grossly mishandled by the Bush administration, billions of dollars and thousands of American lives wasted. It was as bad as Vietnam in terms of misuse of assets. I view Afghanistan as far more complicated a question than Iraq, and I don’t know what the right answers are there. I’m glad I’m not the guy making the decisions.”

Strange bedfellows

Nevertheless, while the wars rage on, Fears views the purchase of the Ukrainian military aircraft as a pragmatic business choice and sound investment. Though he says that the plane was a one-time deal and that he is not a broker of military hardware, records related to his abortive bankruptcy filing on behalf of Air Support Systems show that his acquisition of the plane was not carried out alone. Fears received venture capital from an international security firm operated by former high-ranking military officials. The records show that Trident Response Group of Dallas sank more than $2.5 million into Air Support Systems for the purchase of “future aircraft” on December 5, 2005. The Federal Aviation Administration issued Air Support Systems a certificate of registration for the IL-78 nine months later.

Former Navy SEAL Clint Bruce, a graduate of the U.S. Naval Academy, and businessman C. Dewey Elliott III founded TRG. Bruce is lauded on the Trident website as a past commander of SEAL platoons “engaged in direct support of the Global War on Terror.” Elliott, a fellow Annapolis alum, is listed as having been a “senior consultant with Washington and Boston-based firms where he supported intelligence, systems acquisitions and financial management for DoD [Department of Defense], Fortune 500 and multi-national clients.” The website shows Lt. Col. John B. Skinner III, an active Marine Corps Reserve officer, as TRG’s vice president of operations. The board of directors includes retired Marine Corps Gen. Jack Davis, a former federal agent and state law enforcement officer; and John W. Wroten, a Naval Academy grad, former Marine captain and retired vice president of Electronic Data Systems.

The involvement of former Navy personnel in backing the purchase of a military aircraft seems normal enough, but the other creditors come from widely divergent backgrounds.

For instance, Headlands Ltd., a front company in Gibraltar, has more than $1.1 million tied up in the IL-78, according to the bankruptcy filing, By no small coincidence, Headlands’ address is in the same location as a mail drop for Russell De Leon. He is the husband of Ruth Parasol, the founder of PartyGaming, an online gambling company that has employed Fears’ lobbying services. Together De Leon and Parasol own 40 percent of PartyGaming. They reside in Gibraltar.

Parasol, who grew up in affluent Marin County, Calif., founded PartyGaming with profits from her family’s pornography business. Her father, Richard Parasol, a Holocaust survivor and former Israeli Army officer, opened a string of massage parlors in San Francisco’s Tenderloin district in the early 1970s. After graduating from law school, Ruth Parasol joined the family business, which by then was operating phone sex chat lines. The father and daughter then diversified, investing in Internet Entertainment Group Ltd., an online pornography company. In 1997 Ruth Parasol shifted her interests exclusively to online gambling, which proved even more profitable than the sex trade.

But after President George W. Bush signed a law banning online gambling in 2006, Internet gaming profits took a nosedive. In response, PartyGaming hired Avatar Enterprises Inc., Fears’ lobbying firm. Lobbying records show that Avatar used influential Republican and Democratic lobbyists to work on PartyGaming’s efforts to lift the ban. The Republican, Robert Kjellander, an Illinois lobbyist and former GOP national treasurer, is a close confidante of former White House adviser Karl Rove. The Democrat, Steven Schwadron, is a former chief of staff for Rep. Bill Delahunt of Massachusetts.

Congressional lobbying records show Schwadron represented Avatar on two legislative issues: Internet gaming and “legislation relating to wildfire prevention and suppression.”

Aside from being a midair refueling tanker, the IL-78 is touted by both Fears and NATA as a superb firefighting aircraft.

Fears says there is nothing mysterious about his business relationship with either Kjellander or Schwadron. “I knew Bob (Kjellander) from Springfield years ago, [and] Steve works for a law firm I use in D.C.,” says Fears. “Neither one of them are partners in Avatar. If someone is giving you advice … on the project, then better to be safe than sorry — you register them as having worked on that as well.”

The other major creditor of Air Support Systems is Chicago businessman Kevin Flynn, a casino executive and former gaming partner of Fears. The bankruptcy filing shows that in April 2008 Flynn secured a $1.3 million interest in the IL-78. Fears and Flynn crossed paths years earlier, when Flynn operated the Blue Chip Casino in Indiana. The two were later involved in a failed Indian casino development in California.

In 2001, the Illinois Gaming Board yanked Flynn’s long-dormant state license because two of his investors allegedly had ties to the Chicago mob.

At the time of the revocation, Flynn and his father, Donald Flynn, a former executive of Waste Management Inc., were seeking to transfer their existing gaming license from the shuttered Silver Eagle casino in East Dubuque, Illinois, so they could operate the proposed Emerald Casino in Rosemont, a Chicago suburb. Investors in the casino deal included a lineup of heavy hitters, including associates of Chicago Mayor Richard Daley.

But the state gaming board pulled the Flynns’ license because investors Nick Boscarino and Joseph Salamone were alleged to have ties to organized crime. Salamone, an Oak Park grocer, is the brother of Vito Salamone, a mob soldier who had originally been listed as a casino shareholder. Boscarino is a former Teamster official with close ties to Rosemont Mayor Donald E. Stephens. Boscarino and Stephens once owned a forklift rental company along with organized crime figure William Daddano Jr. The gaming board also cited Emerald for hiring a construction company owned by the wife of Peter M. DiFronzo, the brother of Chicago mob boss John “No Nose” DiFronzo.

The gaming board concluded that Flynn had displayed a “contentious pattern … of providing misleading information to the board and its staff.” “Other than his disagreement with the Illinois Gaming Board,” says Fears, “I don’t know any infraction of any kind that Kevin [Flynn] has ever been involved in.”

Grounded

The story of how Fears and his odd cast of creditors ended up with a grounded Ukrainian behemoth leaking fuel on the tarmac of an isolated airstrip in the Upper Peninsula of Michigan began four years ago.

The IL-78, which was formerly owned by the Ukrainian Air Force, departed Kiev on May 23, 2006, according to flight records. It refueled in Reykjavik, Iceland, before landing the next day at the North Texas Regional Airport, formerly Perrin Air Force Base, in Sherman, Texas. Tactical Air Defense Services, a private military-related start-up company formed by Fears, ran the operational arm of its enterprise at the airport, says retired U.S. Air Force Gen. Charles Searock.

“It was, at the time, the location of a training school wherein we were going to train foreign pilots,” says Searock, a seasoned combat pilot who flew more than 150 B-52 missions during the Vietnam War. The principal officers of TADS, Victor Miller and Mark Daniels, had signed up Searock to oversee the International Tactical Training Center, an ambitious program aimed at providing flight training for NATO pilots and others. Miller also owned and operated Air 1 Flight Services, an aviation maintenance service, at the same airport.

Neither Miller or Daniels could be reached for comment, but a lawsuit filed by the two men last year in Palm Beach County (Florida) Circuit Court provides a glimpse of what apparently transpired.

In March 2005, according to the suit, Fears and a group of Florida investors approached Miller and Daniels to offer financing for their company AeroGroup Inc., a Utah-incorporated military flight training contractor. At that time, AeroGroup had a pending contract to buy the IL-78 and other foreign military aircraft from NATA.

Fears and the other investors claimed that they had obtained control of a publicly traded Nevada mining company, Natalma Industries Inc., and intended to change its name to Tactical Air Defense Services Inc. The intended purpose of the newly formed entity was to raise tens of millions of dollars to bankroll the purchase of assets on behalf of AeroGroup, specifically to buy the IL-78, according to the lawsuit. Toward these ends, Fears solicited start-up capital from Jeff Horan of JT Hanco, according to the lawsuit.

However, the suit claims, instead of backing AeroGroup Fears diverted funds to set up Air Support Systems, which then bought the IL-78 for itself. In Air Support’s 2009 bankruptcy filing, Horan’s name is listed with Trident Response Group, the Dallas-based security firm, as having invested more than $2.5 million in the IL-78.

Miller and Daniels further alleged that when TADS purchased AeroGroup’s assets in 2006 the Florida investors were still contending that tens of millions of dollars would soon be available. A TADS prospectus states that the company was angling to team up with an unnamed competitor [NATA] to provide combat and midair refueling training with the IL-78 and other foreign aircraft. “We have a good chance of being awarded the contract,” the TADS document says.

But the deal never materialized.

“This whole thing was predicated on Air Force contracts that were being negotiated by Mr. Mark Daniels,” says Searock. The contracts, however, were never finalized. As a result, “when they went public with TADS it did not generate the income or the investors as they anticipated,” Searock says.

From Searock’s perspective, everything seemed to be on the level. “We would meet quarterly, sometimes more often, with Mr. Fears and the guys from Florida,” he recalls. “We met in Florida. We met a couple times in Dallas, as he was passing through, and a couple times he came to Sherman. I had no problem with him. We were involved in a lot of different things, including the tanker. There was no reason for me to suspect that these guys weren’t on the up-and-up, if they poured $5 or $6 million into getting this airplane [the IL-78] and having it totally refurbished and delivered. That was an expensive scheme, if it was a scheme.”

But Searock became disenchanted with his employers after he says he shelled out his own cash to cover operating expenses and wasn’t reimbursed. He resigned from his position at the end of 2006 and sued TADS and all of the principal players, including Fears, for back pay.

Miller and Daniels dropped their Florida lawsuit in April 2009 after reaching a settlement agreement with Fears and other investors. As owner of Air 1 Flight Services, however, Miller placed a lien for unpaid service costs on the IL-78 in Texas in June 2009.

Shortly before noon on July 17, 2009, a nine-member Ukrainian crew hired by NATA boarded the IL-78 and took off from North Texas Regional Airport. The flight plan called for the craft to refuel at Wittman Regional Airport, in Oshkosh, Wis., before leaving U.S. airspace and heading to Pakistan. Alerted to the plane’s departure, Miller filed a restraining order, and the plane was diverted to Sawyer International Airport, in Gwinn, Mich., where it has been stranded ever since as a result of litigation.

Despite the Michigan court ruling that favors Miller’s cause, Fears doesn’t believe that the lawsuit has any more validity than the earlier case filed in Florida that Miller and his partner chose not to pursue.

“Air Support Systems owns the plane. It’s registered with the FAA,” says Fears. “The whole thing was a huge misunderstanding and blown out of proportion by the press. Victor Miller and those guys checked with the FAA, found where the plane was at and called the local authorities and said, ‘They have left in violation of a court order.’” But Fears says there’s one problem with that allegation: “ NATA was never served with that court order.”

Fears says Miller’s aviation firm, Air 1 Flight Services, has been out of business for two years. “I can show you the agreement that Victor Miller signed and the release on the lien that shows those bills’ being paid,” says Fears. “It was a phony claim by a company that didn’t exist.

“This is a military aircraft — and it is going over to support the U.S. Air Force allied efforts over there [Afghanistan-Pakistan].”

In 1968, as a young man, Fears stumped for Democratic presidential candidate U.S. Sen. Eugene McCarthy of Wisconsin, who campaigned against the Vietnam War. Today, more than four decades later, he appears comfortable with the concept of profiting from warfare. When asked about his role as a modern day privateer, he paraphrases President George W. Bush’s first secretary of defense: “I think maybe it was [Donald] Rumsfeld who said, ‘If it’s not firing a gun, we should look at privatizing it.’”

Asked whether his activities are somehow involved with covert CIA operations, Fears laughs. “Not that I’m aware of,” he says. “I wish there was something that exciting to all this stuff that I was a CIA guy, but that’s not the case.”

This special report was funded by a grant from the Press Club of Metropolitan St. Louis.