AFFIDAVIT UNDER OATH

 

               

 

               

 

                                        

 

               

 

                                       FRED ACEVEDO

 

               

 

               

 

               

 

               

 

                                      Mesa, Arizona

 

                                      May 10th, 2002

 

                                    9:37 o'clock a.m.

 

               

 

               

 

               

 

               

 

                         MR. PETER C. LOWN                  

 

                                               MaryJo Schumacher

 

                                               Certified Court Reporter

 

                                               No. 50134

 

 

 


 

 

                                        PAGE 2

 

 

 

          1                             I_N_D_E_X

 

          2    

 

          3    

 

          4     WITNESS                             

 

          5    

 

          6    

 

          7    

 

          8              Acevedo, Fred

 

          9    

 

         10    

 

         11    

 

         12     EXAMINATION                                         PAGE

 

         13    

 

         14    

 

         15              By Mr. Lown, Mr. Stone, Mr. Combs         4-123

 

         16    

 

         17    

 

         18    

 

         19                        E_X_H_I_B_I_T_S

 

         20     No.                                                 PAGE

 

         21    

 

         22     1          (General Tool Company letter.)            42

 

         23    

 

         24    

 

         25    

 

 

 


 

 

                                        PAGE 3

 

 

 

          1                     AFFIDAVIT OF FRED ACEVEDO

 

          2    

 

          3    

 

          4     Taken at 9:37 o'clock a.m., May 10th, 2002, in the law

 

          5     offices of Lown, Stone & Hilleman, 2659 East Guadalupe

 

          6     Road, Mesa, Arizona, before MaryJo Schumacher, a

 

          7     Certified Court Reporter, No. 50134, pursuant to the

 

          8     Rules of Civil Procedure.

 

          9    

 

         10    

 

         11    

 

         12    

 

         13              Present at the affidavit under oath were:  Mr.

 

         14     Peter C. Lown, Mr. C. Randall Stone, telephonically, and

 

         15     Mr. P. Douglas Combs.

 

         16                    

 

         17             

 

         18    

 

         19     

 

         20              BE IT REMEMBERED that the witness does waive the

 

         21     right to read and sign the affidavit. 

 

         22    

 

         23    

 

         24    

 

         25    

 

 

 


 

 

                                        PAGE 4

 

 

 

          1                                             Mesa, Arizona

 

          2                                             May 10th, 2002

 

          3                                             9:37 o'clock a.m.

 

          4             

 

          5              MR. LOWN:  Okay.  Present today are C. Randall

 

          6     Stone, who's present by speaker phone, and he is the

 

          7     Arizona attorney representing the foundation in the

 

          8     arbitration litigation; myself, Peter C. Lown, and I'm

 

          9     the Georgia attorney representing the foundation in the

 

         10     Georgia litigation; and P. Douglas Combs, who is the

 

         11     president of the Don Luscombe Aviation History

 

         12     Foundation; and also, Fred Acevedo. 

 

         13    

 

         14                            FRED ACEVEDO

 

         15    

 

         16     called as a witness herein, having been first duly sworn,

 

         17     was examined and testified as follows:

 

         18    

 

         19                            EXAMINATION

 

         20     BY MR. LOWN:

 

         21         Q    And I'll ask Fred to give us his name and

 

         22     address.  Would you spell your name, Fred.

 

         23         A    Sure.  Fred Acevedo, A-C-E-V-E-D-O, and I live

 

         24     at 220 Fullerton Road, Swansea, Illinois 62226.

 

         25         Q    Fred, what is your present employment?

 

 

 


 

 

                                        PAGE 5

 

 

 

          1         A    I'm currently unemployed.

 

          2         Q    And, just as a preliminary matter, could you

 

          3     tell  us or reiterate how you came in contact with the

 

          4     Luscombe Foundation.

 

          5         A    My first contact with the foundation was through

 

          6     John Dearden. I read several excerpts from litigation

 

          7     that was currently in progress.  Later on, after I became

 

          8     a member of Renaissance Aircraft, I was asked to testify

 

          9     at the Arizona litigation.

 

         10         Q    Just recently, you contacted the foundation

 

         11     directly.  How did that come about?

 

         12         A    Right.  Recently, I contacted Doug.  I had a

 

         13     contract with Renaissance Aircraft giving me one percent

 

         14     of the company, and I wasn't sure of its validity, and I

 

         15     thought Doug might know.

 

         16                  Plus, I was aware of the judgment that

 

         17     Renaissance Aircraft had won against the foundation, and

 

         18     I wanted to know the status of that for potential

 

         19     litigation on my behalf.

 

         20         Q    The thing I want to make clear is that you

 

         21     actually called Doug.

 

         22         A    Yes, I did.

 

         23         Q    No one from the foundation contacted you.

 

         24         A    Yes.  I initiated the contact.

 

         25         Q    And you've come here today to Phoenix to give

 

 

 


 

 

                                        PAGE 6

 

 

 

          1     this affidavit of your own free will, without any

 

          2     promise, coercion, threat or promise of reward.

 

          3         A    That's correct.

 

          4         Q    I guess the first thing we would like to ask,

 

          5     we'll start from the most recent thing, and then go back

 

          6     and look at some historical events.

 

          7                  Would you, in your own words, give a little

 

          8     update on what the situation is at Renaissance today. 

 

          9     How is their business going?

 

         10         A    Renaissance has lost, I believe, seven of its 11

 

         11     back orders.  Customers were tired of waiting.  This

 

         12     caused some concern for John, of course, so he wanted to

 

         13     rapidly produce enough aircraft to have a media event so

 

         14     he could generate some new customers.

 

         15                  Not having all the materials, tools and

 

         16     equipment to produce aircraft caused a lot of shortcuts

 

         17     to be taken.  In particular, we used used parts on new

 

         18     airplanes.  The parts that we have in stock from the

 

         19     purchase of the Luscombe inventory, although it was

 

         20     claimed to be new, most of it was severely corroded,

 

         21     unusable or used parts.

 

         22                  Examples of used parts they currently use

 

         23     are oleo springs for the landing gear, several structural

 

         24     bulkheads on the aircraft that were from other airframes,

 

         25     and, you know, various small detail assemblies, landing,

 

 

 


 

 

                                        PAGE 7

 

 

 

          1     light assemblies, things like that.

 

          2                  John, I would say, for the last four months

 

          3     prior to my departure became irrational.  He wanted total

 

          4     control over all aspects of manufacturing.  He would not

 

          5     allow Tomas or I to reject parts that we knew were not

 

          6     airworthy.

 

          7         Q    Could I interrupt you for a minute.

 

          8                  While you were employed by Renaissance, what

 

          9     was your position there?

 

         10         A    I was director of quality, and I was also, at

 

         11     that time, in charge of production.

 

         12              MR. COMBS:  Can we back up for a second for his

 

         13     qualifications, because I would like to get that on the

 

         14     record.

 

         15              MR. LOWN:  I was going to come back to that.

 

         16         Q    BY MR. COMBS:  You came to Renaissance from

 

         17     McDonald Douglas/Boeing.

 

         18         A    McDonald Douglas/Boeing.

 

         19         Q    BY MR. LOWN:  John, why don't you give us a

 

         20     synopsis of your background, starting with education and

 

         21     work experience.

 

         22         A    I have a bachelor's degree in mechanical

 

         23     engineering from Embry-Riddle.  I have an airframe and

 

         24     power plant A&P license.  I have been in IA for 16 years.

 

         25                  I worked for Lockheed Corporation as a

 

 

 


 

 

                                        PAGE 8

 

 

 

          1     design engineer, working on programs such as the C130,

 

          2     C9, various European aircraft.

 

          3                  I went to work for McDonald Douglas

 

          4     Corporation as a design engineer on the F4 program and

 

          5     later moved to the F15 and F18.  I was project engineer

 

          6     for the harpoon missile.

 

          7                  I was laid off from McDonald Douglas in

 

          8     1999.  I became self-employed as an engineering

 

          9     consultant, and later went to work for an aircraft parts

 

         10     company.

 

         11                  And I answered a newspaper ad for

 

         12     Renaissance for quality manager, and that's where I met

 

         13     John Dearden.

 

         14         Q     BY MR. COMBS:  The length of time you were with

 

         15     McDonald Douglas/Boeing, did we get that?

 

         16         A    I was with McDonald Douglas/Boeing for 17 years.

 

         17         Q    BY MR. LOWN:  And you primarily worked as an

 

         18     engineer during that time?

 

         19         A    As an engineer.

 

         20         Q    BY MR. COMBS:  What production processes?

 

         21         A    I worked as liaison.  My job was to ensure all

 

         22     the parts manufactured met drawing requirements.  And,

 

         23     generally, drawings are not perfect, so factory people

 

         24     need help interpreting drawings, redesigning parts, and

 

         25     that was my primary position.

 

 

 


 

 

                                        PAGE 9

 

 

 

          1                  I liked what John had to say about the

 

          2     future of Renaissance Aircraft, and I accepted a position

 

          3     with him as the director of quality.

 

          4                  It was John's intent to hire a separate

 

          5     director of production, but the money was not available,

 

          6     so I filled both slots until my termination from

 

          7     Renaissance on January fourth of 2002.

 

          8         Q    Why did you leave?

 

          9         A    John and I had several disagreements, and Linda. 

 

         10     Linda was HR vice president.  And John was not

 

         11     comfortable -- we had disagreements over quality issues. 

 

         12     The quality manual was delayed on my behalf, because I

 

         13     didn't have enough information to support the data in the

 

         14     quality manual.

 

         15                  I was also performing the function of

 

         16     production manager, and that consumed my time from doing

 

         17     the quality job at the time.

 

         18         Q    BY MR. LOWN:  Just a few minutes ago, when you

 

         19     first mentioned the quality issue before we interrupted

 

         20     you and went back and got your qualifications, you

 

         21     mentioned someone else who was involved in some concerns

 

         22     about that.  Who was that?

 

         23         A    Tomas Straka.  He was director of engineering,

 

         24     and he is currently employed at Renaissance. 

 

         25         Q    Okay.  What was Mr. Straka's job?

 

 

 


 

 

                                        PAGE 10

 

 

 

          1         A    He's director of engineering, but he also has a

 

          2     production role.  We worked together to make sure that we

 

          3     can produce the parts that were required.

 

          4         Q    And you started to tell us about that both you

 

          5     and, I'll just say, Tomas had problems with some of the

 

          6     parts, and that you took this problem to John Dearden,

 

          7     and you did not get a satisfactory result.

 

          8                  Can you be more specific?

 

          9         A    Right.  As an example, the flaps.  We don't have

 

         10     a flap drawing, so we had to reverse engineer the flaps. 

 

         11     John wanted 40 degrees of travel in the flaps.  The

 

         12     design calls for, I believe it's 35.

 

         13              MR. COMBS:  Thirty, I think.

 

         14              THE WITNESS:  Thirty.

 

         15                  And that would require an STC.  And we

 

         16     fought with John, because we didn't have the time or the

 

         17     money to produce that STC, but John had it his way.  It

 

         18     was designed 40 in there, and to this day, it stands that

 

         19     way.

 

         20                  Another one is the chrome plating on several

 

         21     components on the aircraft that were not originally

 

         22     chrome-plated.  It could be a dangerous process.  It

 

         23     actually embrittled parts.  But John liked shiny parts,

 

         24     and John had it his way, against my objection.

 

         25         Q    BY MR. LOWN:  What were some of the parts that

 

 

 


 

 

                                        PAGE 11

 

 

 

          1     we're talking about?

 

          2         A    Control stick, fuel filler caps, flap handle

 

          3     mechanism.  That's a very critical part.  If that breaks

 

          4     in flight or during the landing, that could be a serious

 

          5     condition.

 

          6                  We had fire wall, the steel fire wall, and

 

          7     the company had only one available to use.  I had to

 

          8     produce another one from a tool that I made, but before I

 

          9     can prove the tool or certify the new fire wall, it was

 

         10     already installed on the aircraft.

 

         11         Q    Which aircraft?

 

         12         A    I believe it would be Ship No. 2.  There's

 

         13     Serial Nos. 1 and 2.

 

         14         Q    Okay.  So, you actually manufactured this fire

 

         15     wall, but before it could be proved -- and what do you

 

         16     mean by proved?

 

         17         A    It has to be conformed to the drawing.

 

         18         Q    Okay.

 

         19         A    And the fire wall was never conformed.

 

         20         Q    And John had it chromed and installed on the

 

         21     airplane?

 

         22         A    It wasn't chromed, but had it installed.

 

         23         Q    So it can't be conformed while it's in the

 

         24     airplane?

 

         25         A    Not anymore, no.

 

 

 


 

 

                                        PAGE 12

 

 

 

          1         Q    You mentioned these other parts were also

 

          2     installed in the airplanes.

 

          3         A    I don't know if they're installed yet.  I know

 

          4     they are in the process of and the parts have been

 

          5     chromed and will be installed in Ships 1 and 2.

 

          6                  Other items, we have a No. 6 bulkhead.  I

 

          7     believe that's the next to last bulkhead.

 

          8         Q    BY MR. COMBS:  I missed the number.  It's called

 

          9     No. 7, but it is No. 6.

 

         10         A    Yeah.  We manufactured those bulkheads, but the

 

         11     heat treatment on those bulkheads has never been

 

         12     certified.

 

         13                  The landing gear, we manufactured.  Again,

 

         14     the heat treatment has not been certified.

 

         15         Q    BY MR. LOWN:  Are these parts that have already

 

         16     been installed?

 

         17         A    Yes, these parts have been installed.

 

         18         Q    Which airplanes?

 

         19         A    Ships 1 and 2.

 

         20         Q    What is the extent of FAA involvement in the

 

         21     assembly of these airplanes?

 

         22         A    Well, there's two processes.  One, if you are

 

         23     going through the process of obtaining the production

 

         24     certificate, the FAA should, and most likely would, come

 

         25     in and do a conformity check on all the parts that you're

 

 

 


 

 

                                        PAGE 13

 

 

 

          1     doing.  And if, you know, you have a production

 

          2     certificate, then the company itself will certify those

 

          3     parts.

 

          4                  The other process is that the FAA could come

 

          5     in and certify each aircraft individually.  And that's

 

          6     the way the original Luscombe factory did a lot of

 

          7     aircraft.  But Renaissance has not done that yet.  The

 

          8     FAA has not come in and done the conformity check.

 

          9         Q    Do they have a production certificate?

 

         10         A    No.

 

         11         Q    Have they applied for a production certificate?

 

         12         A    Not to my knowledge.  That was my

 

         13     responsibility.  I turned in the quality manual to the

 

         14     FAA, but the application for production certificate had

 

         15     not been turned in.  John assumed that responsibility

 

         16     himself.

 

         17         Q    So the Q & A manual has been submitted to FAA?

 

         18         A    Yes.

 

         19         Q    Has it been returned approved?

 

         20         A    No.

 

         21         Q    So they're still reviewing it?

 

         22         A    Yes, that's correct.

 

         23         Q    And John assumed responsibility for the

 

         24     production certificate, but, as far as you know, there's

 

         25     been no such application.

 

 

 


 

 

                                        PAGE 14

 

 

 

          1         A    That's correct.

 

          2         Q    Did John give you any indication when that might

 

          3     take place?

 

          4         A    That was supposed to have happened in January. 

 

          5     But talking to several of my friends left back there,

 

          6     that has not happened yet, and no feedback has been

 

          7     obtained from the FAA.

 

          8         Q    My question is:  Do you know why it hasn't

 

          9     happened?

 

         10         A    John is not prepared.  One, they are in a

 

         11     temporary facility in Saint Charles.  The FAA will not

 

         12     issue a production certificate to a temporary facility. 

 

         13     It has to be a permanent address.  The building to be

 

         14     occupied is still under construction.

 

         15         Q    I'm kind of jumping ahead a little bit, but

 

         16     since we're on the subject, it was my understanding that

 

         17     at the arbitration hearing, there was testimony by a

 

         18     number of people, most particularly Kurt Jeschky, that

 

         19     there were actually going to be airplanes produced by

 

         20     December of last year?

 

         21         A    Yes.  I also testified to that effect.

 

         22                  We were -- John was trying to, I guess, use

 

         23     mirrors.  I believe it was in September that we commenced

 

         24     production on ten airframes, but what we actually did is

 

         25     reproduced ten details subassemblies.

 

 

 


 

 

                                        PAGE 15

 

 

 

          1                  Examples would be the horizontal stabilizer

 

          2     hinge assembly.  We had ten in production, so John

 

          3     defined that as ten aircraft in production, one per

 

          4     aircraft.

 

          5         Q    So, in September, he, or Renaissance, started

 

          6     production of these ten, as you described, detail

 

          7     assemblies.

 

          8         A    Yeah, details.

 

          9         Q    And, therefore, John defined that as ten

 

         10     airplanes in production.

 

         11                  How big are these parts we're talking about?

 

         12         A    They are very small.

 

         13         Q    What was the name of the part again?

 

         14         A    Horizontal stabilizer hinge assembly.

 

         15         Q    Just a hinge?

 

         16         A    A hinge, exactly.

 

         17         Q    So, they have ten hinges, and they represented

 

         18     those were the beginning of ten airplanes?

 

         19         A    That is correct.

 

         20         Q    BY MR. COMBS:  Would you consider that a

 

         21     misrepresentation?

 

         22         A    Initially, we had this magic number that was

 

         23     ten, and that's because we had 11 potential depositors. 

 

         24     But Kurt Jeschky and I and Tomas knew we could not

 

         25     produce ten airplanes.  We told John, and John insisted

 

 

 


 

 

                                        PAGE 16

 

 

 

          1     on ten.  So it remained ten until late December, and then

 

          2     that number was changed to five.

 

          3         Q    BY MR. LOWN:  You said that you, Jeschky

 

          4     and who?

 

          5         A    And Tomas.

 

          6         Q    You knew that you couldn't do ten, and you told

 

          7     John that.  About when did that conversation take place?

 

          8         A    That happened prior to our deposition in

 

          9     Arizona.

 

         10         Q    So --

 

         11         A    That would have been August, was it?  I can't

 

         12     remember the date.

 

         13              MR. COMBS:  It was August 15th.

 

         14              THE WITNESS:  Yeah, because that issue had been

 

         15     under discussion.

 

         16         Q    BY MR. LOWN:  But was it long before the August

 

         17     date or about the time of the August date?

 

         18         A    It was about the time.

 

         19                  If you'll recall, I only spent one day here,

 

         20     and the reason was, I had to get back because we had to

 

         21     try to get these production units going.  And we were

 

         22     trying to employ people, so I had people to interview to

 

         23     get a work force established.

 

         24         Q    So, to reiterate, you, Kurt and Tomas agreed you

 

         25     couldn't build ten airplanes.

 

 

 


 

 

                                        PAGE 17

 

 

 

          1         A    Yes.

 

          2         Q    And you made that known to John.

 

          3         A    Absolutely.

 

          4         Q    BY MR. STONE:  But that was known prior to the

 

          5     arbitration hearing?

 

          6         A    Yes, sir.

 

          7         Q    BY MR. LOWN:  And yet, everybody testified that

 

          8     they were going to build ten airplanes.

 

          9         A    Right.  That was the boss', you know, that was

 

         10     the word.  We're going to build ten airplanes.  And I did

 

         11     start producing ten subassemblies.

 

         12         Q    In fact, there was no realistic expectation that

 

         13     you could build ten airplanes.

 

         14         A    No, not on my part; not on Kurt's part; and not

 

         15     on Tomas' part.

 

         16         Q    So, that testimony by all of the individuals,

 

         17     any of those individuals that made those statements at

 

         18     the arbitration proceeding would be false.

 

         19         A    Yes.

 

         20         Q    Or, at the very least, grossly misleading.

 

         21         A    Yes, sir.  I do attest to that.

 

         22         Q    If I might draw an analogy.  It's sort of like

 

         23     me saying that I'm going to build a house because I have

 

         24     a door frame.

 

         25         A    Exactly.  Or, you know, you have ten door frames

 

 

 


 

 

                                        PAGE 18

 

 

 

          1     and ten houses.

 

          2         Q    And the impression that all these people gave at

 

          3     the arbitration was that they were going on ten airplanes

 

          4     with wings, motors, propellers on them, and everybody 

 

          5     knew that was not a realistic expectation.

 

          6         A    That is correct.

 

          7                  And, in fact, at that time, we only had one

 

          8     engine.  Actually, we didn't have it.  It was held by the

 

          9     Bank of Georgia in a vault, because they owned the

 

         10     engine.

 

         11         Q    And was this in August when the engine was in

 

         12     the Bank of Georgia?

 

         13         A    Yeah.  That engine has been at the bank for four

 

         14     our five years.  Well, since they started the process,

 

         15     the bank has owned that engine.

 

         16         Q    Where is the engine today?

 

         17         A    Renaissance has it.

 

         18         Q    How did Renaissance get the engine from the Bank

 

         19     of Georgia?

 

         20         A    They had to pay off the Bank of Georgia loan for

 

         21     the engine.

 

         22              MR. LOWN:  Okay.

 

         23         Q    BY MR. COMBS:  Well, if I can paraphrase what

 

         24     you just went through.

 

         25                  Would you be under the impression that they

 

 

 


 

 

                                        PAGE 19

 

 

 

          1     were trying to create an image of Renaissance as an

 

          2     ongoing operating facility that's producing airplanes? 

 

          3     That was the intent of the testimony in the arbitration.

 

          4         A    Yes, that was.

 

          5         Q    Was that a discussed strategy by their attorney

 

          6     at all?

 

          7         A    I am not aware of that.  I had several meetings

 

          8     with Eric Rowe, but they were primarily on my quality

 

          9     issues that I had internally.

 

         10         Q    BY MR. LOWN:  Explain that.  You said you were

 

         11     meeting with Eric Rowe regarding quality issues.

 

         12         A    As far as testimony, because I testified

 

         13     primarily about quality issues at the hearing, so he

 

         14     wanted to go over my background, things of that nature.

 

         15         Q    Did you discuss with him the problem of corroded

 

         16     parts?

 

         17         A    No.

 

         18         Q    And the chrome parts?

 

         19         A    No.  The chrome parts, this happened later on. 

 

         20     As I said, John, he, I think around November, December,

 

         21     started getting very irrational, difficult to deal with.

 

         22         Q    Now, you said in December, the plan or the

 

         23     expectation of producing airplanes was reduced from ten

 

         24     to five.

 

         25         A    Well, actually, yeah.  Officially, it was

 

 

 


 

 

                                        PAGE 20

 

 

 

          1     reduced to five.  We wanted three.  Tomas and I wanted

 

          2     three, because we thought we could produce three.  We had

 

          3     enough parts on hand; although we didn't have three

 

          4     engines.  We only had one engine.  Later on, a second

 

          5     engine was ordered from Lycoming Aircraft.

 

          6         Q    BY MR. COMBS:  Mr. Jeschky testified that he was

 

          7     ordering like eight or ten engines at the arbitration.

 

          8         A    Well, he discussed ordering that many engines

 

          9     from Lycoming to get a price break.

 

         10              MR. LOWN:  Can we raise our voices.

 

         11              THE WITNESS:  Yeah.  It was discussed to obtain

 

         12     ten engines from Lycoming, except they don't give price

 

         13     breaks.  Their price is their price.  It's retail,

 

         14     basically.  It's not retail.  We get about an $8,000.00 

 

         15     discount, but there are no further discounts from there.

 

         16              MR. LOWN:  What was the testimony that he gave?

 

         17              MR. COMBS:  He testified, from what I

 

         18     remember --

 

         19              MR. LOWN:  Do you have that?

 

         20              MR. COMBS:  I think I can find it quick here.

 

         21         Q    BY MR. LOWN:  Now, you said that the estimate

 

         22     was reduced to five, but when was the expected date that

 

         23     those five would be produced?

 

         24         A    That would be by December 31st.

 

         25         Q    And this was done in December?

 

 

 


 

 

                                        PAGE 21

 

 

 

          1         A    Yes.

 

          2         Q    But, in December, there were not sufficient

 

          3     parts.

 

          4         A    Right.  Early December, I knew that we couldn't

 

          5     do that, and Tomas knew it, but we couldn't discuss it

 

          6     with John because of his irrational behavior.

 

          7         Q    When did you actually leave?

 

          8         A    I left January fourth.

 

          9         Q    On January fourth, what was the status of the

 

         10     plan to produce airplanes?  How many were still being

 

         11     planned short term?

 

         12         A    Two.

 

         13         Q    Now, when did it get reduced to two?

 

         14         A    After the first of the year, John realized that

 

         15     we didn't have enough parts, enough parts or equipment or

 

         16     expertise, to produce any more, so it was reduced to two.

 

         17         Q    What would be the expected completion date of

 

         18     those two airplanes?  What was it at the time when you

 

         19     left?

 

         20         A    At that time, it would have been around March,

 

         21     to deliver one ship to a gentleman in Phoenix, and I

 

         22     can't recall his name right now.  He is a local

 

         23     television --

 

         24              MR. COMBS:  Jay Bretlinger.

 

         25              THE WITNESS:  Right.  He was the owner of

 

 

 


 

 

                                        PAGE 22

 

 

 

          1     Ship 1.

 

          2              MR. COMBS:  I've got the reference, page 851.

 

          3              MR. LOWN:  Why don't you read it to us.

 

          4              MR. COMBS:  Okay.  It's the cross-examination of

 

          5     Kurt Jeschky.

 

          6                  The question is:  "So, there's no way you're

 

          7     going to have ten airplanes flying by the end of the

 

          8     year, right?

 

          9                  "Answer:  That's not true.

 

         10                  "Question:  How are you going to get engines

 

         11     for the other eight?

 

         12                  "Answer:  I'm going to order more engines.

 

         13                  "Question:  Soon?

 

         14                  "Answer:  Yes.

 

         15                  "Question:  You expect to be able to get

 

         16     them in time?

 

         17                  "Answer:  I'm going to order them before the

 

         18     end of September, I'm mean, before the end of August,

 

         19     because if I don't, the price changes.

 

         20                  "Question:  Okay.  Thank you.

 

         21                  "Answer:  I've ordered two.  I'm ordering

 

         22     more."

 

         23         Q    BY MR. LOWN:  So, that was either an inaccurate

 

         24     statement or it was a statement that didn't come to pass.

 

         25         A    That was an inaccurate statement.  We discussed

 

 

 


 

 

                                        PAGE 23

 

 

 

          1     ordering ten engines, but that was a

 

          2     quarter-of-a-million-dollar expense, and we didn't have

 

          3     that kind of money.

 

          4                  We had an engine that we could not get out

 

          5     of jail, basically.  The bank had it.  Later, the money

 

          6     came through.  We paid the Bank of Georgia, and the

 

          7     engine came in.  And then, a second engine was ordered

 

          8     from Lycoming.

 

          9         Q    Then, I guess what you're saying is that, when

 

         10     Kurt Jeschky made that statement in August, he had to

 

         11     know that that was not a true statement.

 

         12         A    Well, he knew we didn't have money to order

 

         13     those parts.

 

         14         Q    Okay.

 

         15         A    Like I said, with Lycoming, it's cash.  They

 

         16     don't give you any terms, other than it's 30 percent down

 

         17     when you order, and the balance is due on delivery.

 

         18         Q    BY MR. COMBS:  Hold on a second.  That's

 

         19     interesting.

 

         20                  He indicated that Lycoming changed the terms

 

         21     because you hadn't accepted an engine previously.

 

         22         A    No.  Kurt had a problem with Lycoming when they

 

         23     were in Georgia.  They had ordered five engines, and they

 

         24     only accepted one, and Lycoming, of course, produced the

 

         25     engines.  When you order, they produce them.  So they got

 

 

 


 

 

                                        PAGE 24

 

 

 

          1     stuck holding four engines but no customer.  So Lycoming

 

          2     was not about to extend credit to Renaissance.

 

          3         Q    BY MR. LOWN:  When did that occur in Georgia?

 

          4         A    It was prior to my time there, but it would have

 

          5     been, I would say, maybe '96 or '97.

 

          6                  I remember reading the data tags on the

 

          7     engine that I received in Cape Girardeau, and the engine

 

          8     was approximately four years old, so it had been stored

 

          9     for four years.

 

         10         Q    So, that would have been around '98, actually.

 

         11         A    Yeah.

 

         12         Q    So, somewhere around '98, the story is that they

 

         13     ordered five engines but only accepted one.  And what was

 

         14     the reason they only took the one engine?

 

         15         A    They didn't have money.

 

         16         Q    They didn't have the money.  And that was back

 

         17     in '98.

 

         18         A    Correct.

 

         19         Q    Now, earlier, we were talking about your role as

 

         20     quality assurance and in production, and you talked about

 

         21     the chrome parts problem and the fire wall.  But you also

 

         22     had made mention about some parts that were used, part or

 

         23     parts, from the inventory in Michigan, the quality of

 

         24     which was not up to speed.

 

         25                  Could you tell us more about that?

 

 

 


 

 

                                        PAGE 25

 

 

 

          1         A    Right, most of the parts from Michigan.

 

          2         Q    Let's talk about, you said, used parts first.

 

          3         A    Right.  This is all tied together.  The

 

          4     inventory from Michigan included used parts, and what

 

          5     they called new parts, parts that had been in storage for

 

          6     several decades, I have to assume.

 

          7                  When we tried to use the new parts, we found

 

          8     they were mostly corroded and unusable.  The only parts

 

          9     that we did wind up using were several used parts that

 

         10     had already been installed in the airframe or

 

         11     subassembly, and we didn't have any new parts to use.  We

 

         12     didn't have the tools to produce new ones, so we used the

 

         13     old ones.

 

         14         Q    What you're saying is the inventory that came

 

         15     from Michigan, as to what you saw, did include use parts

 

         16     that were not part of the original new parts production?

 

         17         A    That is correct.

 

         18         Q    Do you know the origins of those used parts?

 

         19         A    I don't know.  I remember having a tail cone

 

         20     assembly, an upper cabin structure assembly, a lower

 

         21     cabin structure assembly, several landing gear oleo

 

         22     spring assemblies.  These must have been acquired by

 

         23     Mr. Larsen somewhere during that period of time.  It was

 

         24     included in the inventory that Renaissance got.

 

         25         Q    Have these parts been actually installed in any

 

 

 


 

 

                                        PAGE 26

 

 

 

          1     airplanes to date?

 

          2         A    I cannot tell you which airplane or -- as far as

 

          3     now?

 

          4         Q    Yes.

 

          5         A    They have been installed in Ships 1 and 2.

 

          6         Q    These used parts have been installed in these

 

          7     two new production airplanes?

 

          8         A    Yes.

 

          9         Q    Were there any questions regarding the

 

         10     serviceability of these parts that were unresolved?

 

         11         A    Well, I was not part of that production, because

 

         12     I left the production effort.

 

         13         Q    So, that was done after you left?

 

         14         A    Right.

 

         15         Q    How do you know it was done?

 

         16         A    Because I still maintain contact with some of

 

         17     the people at Renaissance.

 

         18         Q    So, you were told by people who were still

 

         19     employees that used parts were put into the new

 

         20     production airplanes.

 

         21         A    Uh-huh.

 

         22         Q    Do you know if they were identified as new used

 

         23     parts, or were they identified as new parts?

 

         24         A    They were identified as new parts.

 

         25         Q    How come the FAA isn't aware of this?

 

 

 


 

 

                                        PAGE 27

 

 

 

          1         A    The FAA has not performed a conformity

 

          2     inspection of Renaissance yet.

 

          3         Q    How is the FAA going to establish that?  You

 

          4     mentioned earlier your extensive experience.  I'm not

 

          5     that knowledgeable.

 

          6                  How does the FAA do the conformity

 

          7     inspection of these when they're already installed?

 

          8         A    In theory, FAA can still have access to the

 

          9     parts.  They are supposed to go in and check all the

 

         10     details, check all the records.  They can check

 

         11     subassemblies currently in production and verify they

 

         12     meet drawing requirements, but it is very easy to get

 

         13     that past an inspector.

 

         14         Q    So, when the FAA goes to look at these two

 

         15     airplanes, these used parts, they're going to be told

 

         16     they're new parts.

 

         17         A    They're not going to be told that they're new.  

 

         18     They're going to be led to assume that.

 

         19         Q    They are not going to be identified as used

 

         20     parts?

 

         21         A    Correct.

 

         22         Q    What kind of audit trail for acquisition of

 

         23     those parts is going to exist?

 

         24         A    They are going to show they are part of the

 

         25     previous inventory from Larsen, and no used parts are

 

 

 


 

 

                                        PAGE 28

 

 

 

          1     identified on the Larsen inventory.

 

          2         Q    There are holding out the Larsen inventory as

 

          3     all new/old stock, and they are not going to tell the FAA

 

          4     that there were, in fact, used parts in that inventory?

 

          5         A    Correct.

 

          6                  The way I was going to certify the parts, I

 

          7     had a two-tier system.  One, I was going to produce new

 

          8     parts, and those would be 100 percent conformity check. 

 

          9     Then I had the Larsen inventory, which I was to provide

 

         10     the FAA with a complete inventory list of those parts,

 

         11     and they would evaluate that to see if they needed to be

 

         12     recertified or not, because they were supposed to be done

 

         13     previous.

 

         14         Q    BY MR. STONE:  The direction to handle it in

 

         15     that manner, did that come from John Dearden?

 

         16         A    No.  That came from Jane Dorsey.  She was MIDO

 

         17     in Kansas City.

 

         18         Q    BY MR. LOWN:  We are talking about two different

 

         19     things.

 

         20                  The procedure to provide that information to

 

         21     the FAA was an instruction from the FAA.

 

         22         A    Correct.

 

         23         Q    But, when you're talking about allowing the FAA

 

         24     to think that the used parts were actually old/new stock,

 

         25     that didn't come from the FAA.

 

 

 


 

 

                                        PAGE 29

 

 

 

          1         A    No, absolutely not.

 

          2         Q    Who gave that instruction?

 

          3         A    That was not verbally given.  That was implied

 

          4     by John, because John was directing the production effort

 

          5     by this time.

 

          6         Q    So, he had taken over the production effort, and

 

          7     that's what he directed.

 

          8         A    Yes.

 

          9         Q    So, in essence, these airplanes, if they are

 

         10     completed and certified by the FAA, it would be done,

 

         11     really, on a fraudulent basis.

 

         12         A    Right.  Now, the FAA does not necessarily have

 

         13     problems with used parts, as long as they're airworthy.  

 

         14     As a customer, your aircraft should have all new parts.

 

         15         Q    Anybody who invested in Renaissance or provided

 

         16     financing for the production of new airplanes, are they

 

         17     going to know that used parts are being used in some of

 

         18     these airplanes?

 

         19         A    There's no document that I know of that has

 

         20     that.

 

         21         Q    You said a lot of Larsen's parts were

 

         22     unserviceable.

 

         23         A    Yes.

 

         24         Q    Is it your impression that those unserviceable

 

         25     parts are clearly not going to be used?

 

 

 


 

 

                                        PAGE 30

 

 

 

          1         A    I separated them from the inventory.  They were

 

          2     so badly corroded that they were obviously defective, and

 

          3     you couldn't use them.  They should have been thrown

 

          4     away, but they were separated.

 

          5         Q    Why weren't they thrown away?

 

          6         A    There was historical value to some of them, and

 

          7     some of them were marginal, so they could have been

 

          8     repaired and used on aircraft that was either painted or

 

          9     appearance was not an issue.

 

         10              MR. LOWN:  Randall, do you have anything in this

 

         11     area?

 

         12         Q    BY MR. STONE:  You said John Dearden implied 

 

         13     the conduct you're talking about.  How did he do that?

 

         14         A    Well, he was directing the production effort, so

 

         15     he would tell the production people which parts to use. 

 

         16     Example, if we didn't have a bulkhead, we don't have a

 

         17     bulkhead tool, like a No. 4 ring, which was probably the

 

         18     largest bulkhead on the airframe, if the only one

 

         19     available was a used bulkhead, that's what they used.

 

         20         Q    BY MR. LOWN:  Correct me if I'm wrong, Fred, but

 

         21     what you're saying is that's at the point at which John

 

         22     simply took over production and gave these instructions

 

         23     directly to employees.

 

         24         A    That's correct.

 

         25         Q    When did that occur?

 

 

 


 

 

                                        PAGE 31

 

 

 

          1         A    It must have been, I would say, early December. 

 

          2     John realized that I was very busy.  My job became more

 

          3     producability.  I had to figure out how to get parts

 

          4     made, because we had no parts.  So John placed Kurt

 

          5     Jeschky in charge of production.  Kurt became vice

 

          6     president/general manager of production.  I can't recall

 

          7     the exact title, but however, John was directing the

 

          8     effort.  Kurt is still busy doing financing.

 

          9         Q    BY MR. COMBS:  Let me back up here.  I've got

 

         10     something.

 

         11                  For the Larsen parts that you were talking

 

         12     about, you testified that you were going to have the FAA

 

         13     review them in order to conform.  There was never an FAA

 

         14     review of those parts.

 

         15         A    No, FAA never reviewed them.  They are still

 

         16     waiting for the list of all the parts to be conformed.

 

         17         Q    Did you ever send it to them?

 

         18         A    No.  That was part of the last package for the

 

         19     quality manual.

 

         20         Q    BY MR. LOWN:  If I may interrupt.

 

         21                  We're talking about preparing the list of

 

         22     these parts for the conformity inspection by FAA, and

 

         23     you're saying at the time you left in early January of

 

         24     this year, that list had not even been sent to FAA.

 

         25         A    The list was prepared, the parts were

 

 

 


 

 

                                        PAGE 32

 

 

 

          1     identified.  The Larsen parts, of course, had the

 

          2     standard Luscombe part number, the Renaissance parts had

 

          3     an "R" in front to distinguish one from the other.

 

          4         Q    But when was that list prepared?

 

          5         A    I started the process in early November to

 

          6     produce the list.

 

          7         Q    Now, did you and the other principal people,

 

          8     Tomas, John Dearden and Kurt Jeschky, know back in

 

          9     August, at the time of the arbitration proceeding, that

 

         10     you would have to prepare that list and send it to FAA?

 

         11         A    Yes.

 

         12         Q    At the time of the testimony, that hadn't even

 

         13     been prepared.

 

         14         A    Well, John was aware we had to conform those

 

         15     parts.

 

         16         Q    But no steps had been taken to complete that

 

         17     process.

 

         18         A    Correct.

 

         19         Q    BY MR. COMBS:  At the time of the arbitration,

 

         20     you didn't know whether those parts would be usable or

 

         21     not usable for production.

 

         22         A    That's right.  And that's what actually gave us

 

         23     a surprise, because we thought that there were a lot of

 

         24     parts available.  John had quoted to me that he had over

 

         25     80 percent of all the new parts needed to produce

 

 

 


 

 

                                        PAGE 33

 

 

 

          1     aircraft.  Based on that, I generated a production

 

          2     schedule.  They had 80 percent of the parts, and to make

 

          3     20 percent more, that was no big deal.

 

          4                  We went back and started doing inventory,

 

          5     and I found most of the parts were junk.

 

          6         Q    And that inventory was after the arbitration.

 

          7         A    Yes.

 

          8         Q    BY MR. LOWN:  Prior to the arbitration, John

 

          9     represented that he had the parts.

 

         10         A    Yes.

 

         11         Q    How did he indicate to you he came to that

 

         12     conclusion?

 

         13         A    Well, from the discussions with Kurt Jeschky,

 

         14     Kurt was aware that the parts, a lot of the parts, were

 

         15     unusable, and he recommended to John that the parts be

 

         16     either thrown away or sent back to Larsen.  However, John

 

         17     decided to keep the parts anyway.  He kept them in the

 

         18     inventory.  I believe that was for the purpose of

 

         19     obtaining financing.

 

         20         Q    Okay.  So, Kurt Jeschky informing John that

 

         21     those parts could not be used in production, that took

 

         22     place prior to August?

 

         23         A    That took place prior to my employment at

 

         24     Renaissance.

 

         25         Q    What was your start date again?

 

 

 


 

 

                                        PAGE 34

 

 

 

          1         A    I started August -- I'm sorry, April first of

 

          2     2001.

 

          3              MR. COMBS:  Should have been a clue.

 

          4              THE WITNESS:  This took place back in Georgia,

 

          5     and Kurt had remarked to me how he was unhappy that he

 

          6     carted all these parts from Georgia to Missouri, and we

 

          7     shouldn't have.  It was a great effort to pack them and

 

          8     reinventory them.

 

          9         Q    BY MR. LOWN:  So, you believe that the reason

 

         10     John kept them in the inventory was for the purposes of

 

         11     representing to potential lenders or investors that these

 

         12     were valuable items?

 

         13         A    That we had inventory.

 

         14         Q    Did Kurt tell you that?

 

         15         A    No.  But that's an assumption that I have to

 

         16     make, because there was no other value for those parts.

 

         17         Q    Do you know if John ever made any

 

         18     representations to potential lenders, potential investors

 

         19     or to state authorities who were involved in development

 

         20     funds regarding those inventories?

 

         21         A    I don't know if he made any representations, but

 

         22     I do know that Kurt put a value on the inventory.

 

         23         Q    When was that done?

 

         24         A    That was done the middle of 2001.

 

         25         Q    Do you know if that appraisal was provided to

 

 

 


 

 

                                        PAGE 35

 

 

 

          1     any of these finance forces?

 

          2         A    I don't know, because I wasn't involved in the

 

          3     banking and financing discussions.

 

          4         Q    How about the State of Missouri?

 

          5         A    I am not sure of that.  I do have some

 

          6     information pertaining to the proposal from the state

 

          7     and, of course, the bond issue.

 

          8         Q    Getting back to current airplanes that are in

 

          9     production, you mentioned they didn't have the money to

 

         10     buy all the components.  What about the radios and

 

         11     instruments and all of these parts that are going into

 

         12     these airplanes?  Where are they coming from?

 

         13         A    They didn't have money for radios.  The first

 

         14     set of radios for Bretlinger, he purchased and he

 

         15     delivered to Renaissance himself.

 

         16         Q    And where are those radios now?

 

         17         A    I believe they are installed on aircraft

 

         18     9912 Charlie, which is John Dearden's airplane.

 

         19         Q    So, Bretlinger's radios are in John Dearden's

 

         20     airplane?

 

         21         A    That is correct.

 

         22         Q    And the first airplane is going to Bretlinger,

 

         23     so I presume they will take them out of John's.

 

         24         A    I have to make that assumption.

 

         25         Q    Right now, it's installed in John's airplane.

 

 

 


 

 

                                        PAGE 36

 

 

 

          1         A    Right.

 

          2         Q    What's the status of John's airplane?

 

          3         A    John's airplane, which is 12 Charlie, was

 

          4     completely torn apart.  It was going to be used to test

 

          5     the brake STC.  It was going to be used for testing the

 

          6     seat belt shoulder harness STC and the new instrument

 

          7     panel installation.

 

          8                  They were going to do a pull test on it. 

 

          9     They did a pull test on it.  I don't know how much

 

         10     structural damage was performed.  A pull test was done on

 

         11     12 Charlie, and I have to assume it was prepared after

 

         12     the pull test, and 12 Charlie was basically completely

 

         13     torn apart, and it had to be put together again to make

 

         14     it flyable.

 

         15         Q    Why was it disassembled?

 

         16         A    It was a lot of issues.  Every time John needed

 

         17     to see how something was put together, 12 Charlie was

 

         18     pulled apart as a show-me type of example.

 

         19         Q    BY MR. COMBS:  That was the factory example?

 

         20         A    Yeah.  We called that one our pig.

 

         21                  Like I said, the landing gear or the brake

 

         22     installation STC has not yet been approved, so it will be

 

         23     tested on 12 Charlie.

 

         24                  (Whereupon a short recess took place.)

 

         25         Q    BY MR. LOWN:  Fred, when you came to work in

 

 

 


 

 

                                        PAGE 37

 

 

 

          1     April of 2001, what were you told about the tools, dies

 

          2     and the parts as far as where they came from?

 

          3         A    Well, John initially told me that the company

 

          4     owned the tools, all the tools, and approximately 80

 

          5     percent of all the parts required to produce airframes. 

 

          6     And, based on that, you know, I was elated, because it

 

          7     made my job so much easier.

 

          8                  However, later on, I found out that more

 

          9     than 50 percent of the parts were totally unusable, the

 

         10     rest were questionable, and the tools were in dire need

 

         11     of repair.  We have very few tools that were actually

 

         12     usable.

 

         13         Q    BY MR. COMBS:  Had they not spent a ton of money

 

         14     in Georgia to repair them?

 

         15         A    They spent a ton of money to arrest further

 

         16     corrosion, but there was no effort to repair the tools. 

 

         17     I wound up doing a lot of repairs myself.

 

         18         Q    BY MR. LOWN:  We're talking about the tools and

 

         19     dies as separate or all together?

 

         20         A    All together.

 

         21                  And by tools, I mean fixtures, blanking

 

         22     dies, forming dies, templates, that kind of thing.

 

         23         Q    But you said that John told you that he owned

 

         24     the tools.

 

         25         A    Well, he told me the company owned the tools. 

 

 

 


 

 

                                        PAGE 38

 

 

 

          1     Not till later on did I found out that the tools were

 

          2     leased from Larsen.

 

          3         Q    When was it that John told you that?

 

          4         A    It must have been prior to my hire date.  We had

 

          5     an interview about two months before I hired, and we

 

          6     discussed the future of the company and what my role in

 

          7     the company was going to be.

 

          8         Q    Okay.

 

          9         A    And, you know, what I was expected to do.  And,

 

         10     of course, I asked what did he have for me that would

 

         11     allow me to do the job.

 

         12         Q    Was there anyone else present during these

 

         13     conversations?

 

         14         A    No.  I did meet separately with Linda Dearden,

 

         15     mainly to discuss HR issues.  As far as technical issues,

 

         16     I discussed them just with John.

 

         17         Q    Did he tell you where the tools came from at the

 

         18     time?

 

         19         A    No.

 

         20         Q    He didn't tell you any information about the

 

         21     source?

 

         22         A    No, I had no source information.  I learned more

 

         23     about the source of the tools from Kurt.

 

         24         Q    When did that occur?

 

         25         A    It was after April.  I came in and the company

 

 

 


 

 

                                        PAGE 39

 

 

 

          1     was still officially in Georgia.  All I had was that list

 

          2     in Cape Girardeau.  Kurt gave me a bunch of information

 

          3     to read, the history of the Luscombe, technical

 

          4     literature  on the Luscombe, that kind of thing.  I did

 

          5     get a list of tools, and that's when I found out the

 

          6     tools were a purchase/lease agreement.

 

          7         Q    How did you find out that it was a

 

          8     lease/purchase agreement?

 

          9         A    I was reading some documents.  In fact, it's on

 

         10     a business plan that was given to me.

 

         11         Q    And in there it indicated that they were leased?

 

         12         A    It indicates that they have a lease, a 12-year

 

         13     lease, from John Larsen at $2,000.00 a quarter, with an

 

         14     option to purchase the tools at the end of the lease.

 

         15         Q    Did you discuss the lease or the status of these

 

         16     parts with anyone?

 

         17         A    No.

 

         18         Q    You just learned it from documents you were

 

         19     reviewing?

 

         20         A    That is correct.

 

         21         Q    And this was never actually discussed with John

 

         22     Dearden or Kurt?

 

         23         A    No, I never raised the issue.  I read the

 

         24     document, and the tools were available to me.  That was

 

         25     my interest.  I had the tools, and they were leased, so

 

 

 


 

 

                                        PAGE 40

 

 

 

          1     the company had full use of the tools.

 

          2         Q    Do you know, of your own knowledge, whether John

 

          3     Dearden or Kurt Jeschky ever represented to anyone else

 

          4     that the status of these tools were leased versus owned?

 

          5         A    No.  But frequently, when a customer would come

 

          6     around or a potential investor, John would assert that we

 

          7     owned all the tools to produce the aircraft.  He didn't

 

          8     say lease; he said we owned.

 

          9         Q    Can you remember any specific occasions?

 

         10         A    I can't remember names, but we've had potential

 

         11     customers that would, you know, come in and have a tour

 

         12     of the plant, and I would take them through our tool

 

         13     inventory area, and it would be portrayed as ours, our

 

         14     tools.

 

         15         Q    When you say portrayed, John would be present?

 

         16         A    Oh, yeah, he was always present.

 

         17         Q    And he would tell this person in your presence

 

         18     that those tools belonged to Renaissance?

 

         19         A    Yes.

 

         20         Q    Do you remember any investors?

 

         21         A    I do, but not names, because I was briefly

 

         22     introduced to someone as director of quality, and I would

 

         23     give them a quick overview of our quality program.

 

         24         Q    How about any representatives from the State of

 

         25     Missouri?

 

 

 


 

 

                                        PAGE 41

 

 

 

          1         A    I have met with Mr. Sean Hagner.

 

          2         Q    Can you spell that?

 

          3              MR. COMBS:  H-A-G-N-E-R.

 

          4         Q    BY MR. LOWN:  You were present during a meeting

 

          5     with Mr. Hagner?

 

          6         A    I was present during several meetings with

 

          7     Mr. Hagner, primarily when we were discussing the

 

          8     building project, since the state had a vested interest

 

          9     in it.

 

         10         Q    Was there discussion regarding the status of the

 

         11     tools and parts during any of those meetings?

 

         12         A    To the extent that we were asserting that we

 

         13     needed a building to store our parts, to protect our

 

         14     tools, never to protect our leased equipment as such.

 

         15         Q    So, he at least referred to the equipment in a

 

         16     way that would cause Mr. Hagner to believe they were

 

         17     owned.

 

         18         A    Yes, I believe so.  I believe everyone in the

 

         19     city, as far as the city management that dealt with us,

 

         20     assumed that we owned all the property that's located

 

         21     currently at the airport.

 

         22              MR. LOWN:  Okay.  I would like you to take a

 

         23     look at a letter from General Tool, which we're going to

 

         24     mark as Exhibit 1.        

 

         25                  (Whereupon Exhibit No. 1 was marked for

 

 

 


 

 

                                        PAGE 42

 

 

 

          1     identification.)

 

          2         Q    MR. LOWN:  And that is a letter from General

 

          3     Tool dated June 7th, 2000, which appears to be an

 

          4     appraisal of tooling and dies.

 

          5                  Are you familiar with this letter?

 

          6         A    Yes.  That letter was presented to me by Kurt

 

          7     Jeschky.

 

          8         Q    In what manner or what purpose was it presented

 

          9     to you?

 

         10         A    It was presented to me to give me an overview of

 

         11     my resources within the company.

 

         12         Q    Okay.  Would you take a look at the values

 

         13     placed on the equipment.

 

         14         A    (Witness complies.)

 

         15         Q    Let's first take a look at the tooling.  And, if

 

         16     you've had a chance to inspect those, would you give me

 

         17     your thoughts about whether or not those values are

 

         18     realistic.

 

         19         A    I've looked at this letter several times, and I

 

         20     felt that the values are highly inflated.

 

         21         Q    Okay.  As far as the tooling is concerned, it

 

         22     lists the estimated current value at 200,000 to

 

         23     $250,000.00.

 

         24                  What do you think that equipment might be

 

         25     worth?  And that's separated from the dies.

 

 

 


 

 

                                        PAGE 43

 

 

 

          1         A    Right.  The tools, if I had to go out and

 

          2     purchase -- I would say they're probably worth around

 

          3     $50,000.00.  They are highly corroded.  They are not

 

          4     reparable.  The replacement value would be high, what you

 

          5     would have to pay today.  But the current value is highly

 

          6     inflated.  I would say about $50,000.00 is what we have.

 

          7         Q    The dies estimate the current value at seven to

 

          8     ten million dollars.

 

          9                  What would be your observation there as to

 

         10     what the true value would be?

 

         11         A    Well, without being a die engineer but knowing

 

         12     what I have, most of the tools are unusable, and we're

 

         13     talking tools and dies.  I use the words interchangeably.

 

         14                  Most of the dies are unusable.  Every one of

 

         15     them requires repair prior to use.  I would not value

 

         16     that entire inventory at more than a half a million

 

         17     dollars.

 

         18         Q    Now, if you're going to build large numbers of

 

         19     airplanes, given some of the projections that Mr. Dearden

 

         20     had made, in excess of a hundred units per year, how are

 

         21     you going to do that with these dies if they are not

 

         22     serviceable?

 

         23         A    Well, I've read the projection from John of as

 

         24     many as 1500 airplanes per year, and I know that is

 

         25     impossible.

 

 

 


 

 

                                        PAGE 44

 

 

 

          1                  John's assertion comes from the original

 

          2     Luscombe factory, and I'm sure they had multiple tools in

 

          3     use.  We have one tool.  It can only be used by one team

 

          4     of employees at a time.  So, I seriously doubt that we

 

          5     could have built more than one airplane a week.

 

          6         Q    Your estimate would be about 52 airplanes a year

 

          7     would be the most.

 

          8         A    Yeah, with the current tools.

 

          9         Q    Many of these tools in their current state, are

 

         10     they usable?

 

         11         A    They are not usable.  The tools that I did use,

 

         12     I had to repair.

 

         13                  Examples are some of the cutting dies are no

 

         14     longer usable because they are not sharp.  They are

 

         15     pitted, and they have to be reground.  That requires

 

         16     specialized machinery to regrind them.  So we have to

 

         17     hand route parts to create blanks.  That's time

 

         18     consuming.  The forming dies are not usable.  We hand

 

         19     form a lot of parts.

 

         20                  Some of the tools are missing, such as the

 

         21     fire wall forming tool is missing, the No. 4 bulkhead

 

         22     forming tool is missing.  They're very large tools.  All

 

         23     the tools for forming the skin, the compound curvature

 

         24     tools are missing. 

 

         25         Q    You mentioned the compound curvature tools for

 

 

 


 

 

                                        PAGE 45

 

 

 

          1     the skin, you said they are all missing.

 

          2         A    All missing.

 

          3         Q    Do you know how Renaissance intends to produce

 

          4     those parts?

 

          5         A    They are currently purchasing those parts from

 

          6     Univair.

 

          7         Q    Do you know how Univair is producing those

 

          8     parts?

 

          9         A    Yes, I do.  Univair has their own tools, some of

 

         10     them.  They have a hammer forge they have to stretch

 

         11     form.  They apparently, at one time, obtained duplicate

 

         12     copies of the tools, or they created their own tools.

 

         13         Q    Are the cost estimates that Mr. Dearden used in

 

         14     his marketing, and various other proposals, based on the

 

         15     cost of acquiring those parts from Univair or based on

 

         16     producing them yourself?

 

         17         A    They were based on in-house production.

 

         18         Q    So, you're saying that the cost estimates

 

         19     pertaining to these skin areas, production of these

 

         20     skins, is based on in-house production, but you don't

 

         21     have the tools.  They don't exist.

 

         22         A    That is correct.

 

         23         Q    Did John Dearden know that in August of last

 

         24     year?

 

         25         A    Yes.

 

 

 


 

 

                                        PAGE 46

 

 

 

          1         Q    I mean, they don't exist.  He's known it all

 

          2     along.

 

          3         A    I take that back.  John Dearden knew he didn't

 

          4     have the tools, but he thought he had parts.

 

          5         Q    I see.

 

          6         A    He had the Larsen inventory.

 

          7         Q    But that inventory at best was still limited.

 

          8         A    Well, that inventory was all corroded.  We

 

          9     couldn't use any Larsen parts for those particular tools.

 

         10         Q    Were these skin-forming tools simply corroded,

 

         11     or they simply didn't exist at all?

 

         12         A    They don't exist at all.

 

         13         Q    Do you know what happened to the original ones?

 

         14         A    No.  Our best guess is they are probably buried

 

         15     somewhere in Michigan.

 

         16         Q    But, as far as you know, Renaissance has never

 

         17     had any critical skin-forming tools.

 

         18         A    No.

 

         19         Q    Is the cost of procuring these parts from

 

         20     Univair significantly higher than in-house production?

 

         21         A    Absolutely.  A typical part that we can make for

 

         22     $50.00 would cost about $400.00 from Univair.

 

         23         Q    We're talking eight times as expensive.

 

         24         A    Yes.

 

         25         Q    And the projections of the costs that

 

 

 


 

 

                                        PAGE 47

 

 

 

          1     Mr. Dearden and Mr. Jeschky presented at the hearing,

 

          2     then, were totally unrealistic.

 

          3         A    They were very fictitious.  I had made my own

 

          4     estimate of what it cost to build the airplane.

 

          5         Q    I'm going to save that for later.

 

          6                  Do you know if these parts, the former

 

          7     Larsen inventory and the tools and dies, are currently

 

          8     pledged as collateral or security for any loans or

 

          9     financing of any type?

 

         10         A    I don't know.  I don't know that for a fact, you

 

         11     know.  I've heard that.

 

         12         Q    What have you heard?

 

         13         A    They were pledged as collateral for loans.

 

         14         Q    Which loans?

 

         15         A    I believe the DED loan, which is the development

 

         16     loan with the State of Missouri.

 

         17         Q    Any other loans that you know about?

 

         18         Q    BY MR. COMBS:  What about the action-fund loan?

 

         19         A    The action-fund loan, yes.  And also, I believe

 

         20     they were pledged as collateral to the Bank of Eastman.

 

         21         Q    BY MR. LOWN:  Have you seen any of the proposal

 

         22     guidelines from the State of Missouri before?

 

         23         A    No, I never have.

 

         24         Q    At the meeting that you had with these people in

 

         25     Missouri, did you discuss any of this stuff?

 

 

 


 

 

                                        PAGE 48

 

 

 

          1         A    We discussed the purpose of the money.  The bond

 

          2     issue was a very trying time, because it took so long to

 

          3     issue the bond.  So, I participated in some of the

 

          4     meetings for release of the bond.

 

          5         Q    The question about the bond issue, if I may go

 

          6     there.

 

          7                  There was an allegation that there were some

 

          8     packages sent to Missouri, with regards to that, that had

 

          9     delayed the bonding or funding in Missouri.

 

         10                  Were you familiar with that?  Was that

 

         11     discussed in any of those meetings?

 

         12         A    Yes.

 

         13         Q    What was the discussion with the people about

 

         14     that property?

 

         15         A    What I remember, from either the meetings or

 

         16     some side discussion with John, was the state was

 

         17     concerned over the status of the litigation with the

 

         18     tools.

 

         19         Q    Was the state aware of the litigation involving

 

         20     tool title?

 

         21         A    I am not certain of that, but I knew the state

 

         22     was aware of the litigation, and there were

 

         23     communications between Mr. Rowe and the state concerning

 

         24     that.  At some point, it was cleared, and the state

 

         25     released the bond issue.

 

 

 


 

 

                                        PAGE 49

 

 

 

          1         Q    You're saying they had significant discussions

 

          2     with Mr. Rowe?

 

          3         A    Eric Rowe.

 

          4         Q    Do you know whether any documents transpired out

 

          5     of that?

 

          6         A    None that I'm aware of.

 

          7         Q    Okay.  But he appeared to be able to smooth over

 

          8     the questions with this thing?

 

          9         A    Yeah.  The issue was resolved, and the state

 

         10     released the bond issue.  The bonds were sold.

 

         11         Q    The bonds were sold to build the building?

 

         12         A    Yes.  The building is currently under

 

         13     construction.

 

         14         Q    Do you have any impression as to -- I mean, I'll

 

         15     give you a little background.

 

         16                  We're under the impression that various

 

         17     people, specifically, probably, Mr. Dearden and their

 

         18     attorneys, as long as a year ago, represented to the

 

         19     State of Missouri that the Georgia litigation was going

 

         20     to be over and done with.

 

         21                  Did you ever have any conversations with

 

         22     anybody regarding that?

 

         23         A    Well, I've always heard John discussing it, and,

 

         24     of course, my impression was that the Georgia litigation

 

         25     was a done deal.  It was going to be dismissed, and it

 

 

 


 

 

                                        PAGE 50

 

 

 

          1     just kept dragging on.

 

          2         Q    And you heard that from John himself, that it

 

          3     was going to be dismissed?

 

          4         A    Yes.

 

          5         Q    From your meetings with John and various people

 

          6     with the State of Missouri, what do you think their

 

          7     impression of the situation in Georgia was?

 

          8         A    They were concerned initially, and, of course,

 

          9     they held back the money until they got a warm fuzzy.  At

 

         10     some point, the issue was resolved as far as the state

 

         11     was concerned, because they released the bond.

 

         12         Q    BY MR. COMBS:  Do you know when that was?

 

         13         A    I would have to guess around November, because I

 

         14     was also project manager for the building, another one of

 

         15     my little hats.

 

         16         Q    You had a lot of hats.

 

         17         A    So I would attend meetings with the city as far

 

         18     as building construction, and I would meet with the

 

         19     architects, and I couldn't get anything done because the

 

         20     bond had not been released, and not until late November,

 

         21     the issue was released and would release bids for the

 

         22     building.

 

         23         Q    BY MR. LOWN:  You don't know what the triggering

 

         24     event was, though?

 

         25         A    The triggering event was the state received

 

 

 


 

 

                                        PAGE 51

 

 

 

          1     documentation from John's lawyer that the Georgia issue

 

          2     had been resolved.

 

          3         Q    How do you know that?

 

          4         A    Because those were the preconditions from the

 

          5     state.  They would not release the bond.  The state

 

          6     attorney would not release the bond until that issue was

 

          7     resolved.

 

          8         Q    The state received documentation from John's

 

          9     attorneys?

 

         10         A    Yes.

 

         11         Q    And that happened sometime in November?

 

         12         A    Sometime in November.

 

         13         Q    Have you any idea what that documentation was?

 

         14         A    I don't know.  I would assume it was a letter

 

         15     from John's attorneys that would appease what the

 

         16     concerns were from the state.

 

         17         Q    And which state agency was it?

 

         18         A    That was the Missouri Development --

 

         19         Q    DED?

 

         20         A    Yes.

 

         21         Q    There was an article a couple of months ago in

 

         22     the "Southeast Missourian" saying that the Georgia

 

         23     litigation had been resolved.  Do you know anything about

 

         24     the origins of that article?

 

         25         A    Well, John had an interview with a reporter from

 

 

 


 

 

                                        PAGE 52

 

 

 

          1     the "Missourian" which I know didn't go well, because he

 

          2     demonized several of the city officials and, you know,

 

          3     that didn't help.

 

          4         Q    This was actually a later article.  Do remember

 

          5     that article?

 

          6         A    Yeah.  Even I caught hell on that.  I was very

 

          7     close to the airport manager.

 

          8         Q    But, getting back to this triggering event in

 

          9     November, who led you to believe that it was something

 

         10     from John's attorneys that led to that?

 

         11         A    Well --

 

         12         Q    Do you have a name?  Was there someone you

 

         13     talked to?

 

         14         A    Those issues were discussed informally, almost

 

         15     on a daily basis, you know, at meetings.  And John, of

 

         16     course, had all the data.  John and Kurt were the primary

 

         17     custodians for the company.  But we would hear bits and

 

         18     pieces of what was going on.  Tomas and I were never key

 

         19     players in the financial side of the house.

 

         20         Q    This, I think, is a little off the area of the

 

         21     Georgia litigation, but I just kind of have to ask you.

 

         22                  You talked a little bit about the current

 

         23     status of the company.  Now they've got this building

 

         24     that is in a state of completion.  At this point, where

 

         25     does the building stand?

 

 

 


 

 

                                        PAGE 53

 

 

 

          1         A    The shell is erected, and I believe the roof is

 

          2     installed, so now they are working on the infrastructure.

 

          3         Q    When is Renaissance projected to move into that?

 

          4         A    I don't know the exact date, but initially, we

 

          5     were supposed to have moved in there in October of 2001,

 

          6     and that date got rolled because the construction didn't

 

          7     start until March, I believe.

 

          8         Q    Now, you told me earlier that the FAA would not

 

          9     issue a production certificate to an entity that was not

 

         10     in a permanent structure.

 

         11         A    That is correct.

 

         12         Q    So, moving into a permanent building was a 

 

         13     prerequisite for getting the production certificate.

 

         14         A    Yes.

 

         15         Q    And, in August, at the time of the hearing, the

 

         16     building hadn't even begun.

 

         17         A    That is correct.

 

         18                  However, the FAA can still provide a

 

         19     certificate of airworthiness through a different

 

         20     technique on a temporary basis, and that's what we were

 

         21     counting on.

 

         22         Q    But that didn't happen, either.

 

         23         A    No, that didn't happen.

 

         24         Q    And the reason it didn't happen was because

 

         25     there were no airplanes.

 

 

 


 

 

                                        PAGE 54

 

 

 

          1         A    There were no airplanes.

 

          2         Q    So, where does Renaissance stand today?  Their

 

          3     projection is they are now going to move into the

 

          4     building when?

 

          5         A    I think sometime in early summer.

 

          6         Q    And how are their finances?  Are they going to

 

          7     be able to move in and set up production?

 

          8         A    I don't believe they have the money to do that. 

 

          9     They can certainly move in, but they don't have enough

 

         10     money to purchase equipment and hire new people.

 

         11         Q    How do you know that?

 

         12         A    Well, they stopped paying salaries last week,

 

         13     and, of course, when I was there, they cut all the staff,

 

         14     all the management staff, salary because they couldn't

 

         15     meet the rest of payroll.

 

         16         Q    So, you're talking about in December.  When did

 

         17     they cut?

 

         18         A    Actually, salaries started being cut back even

 

         19     before the August litigation.

 

         20         Q    Was your salary cut prior to August?

 

         21         A    Yes.

 

         22         Q    And what was that percentage-wise?

 

         23         A    Fifty percent, initially.

 

         24         Q    And they did that because they were running

 

         25     short of money, even back in the pre-August time frame?

 

 

 


 

 

                                        PAGE 55

 

 

 

          1         A    Running short or had no money.

 

          2                  Tomas worked without salary for nine months,

 

          3     I believe.

 

          4         Q    What's the date of your information?  When did

 

          5     you last talk to him?

 

          6         A    Last week.

 

          7         Q    And is he still not getting paid?

 

          8         A    Oh, yeah, he's not getting paid.

 

          9         Q    So, we're talking really around the middle of

 

         10     last year, they stopped paying him.

 

         11                  How is he living?

 

         12         A    He's been living on plastic all this time.  But

 

         13     Renaissance owes him probably 80,000 or $90,000.00 in

 

         14     back pay, and several other gentlemen, too.  And a

 

         15     gentleman that worked for me, he was kind of like an

 

         16     all-around mechanic, they owe him 800 hours of salary.

 

         17         Q    Are these hourly wages?

 

         18         A    He is hourly, yes.

 

         19         Q    BY MR. STONE:  What's his name?

 

         20         A    His name is John Ellis.

 

         21                  I talked to him yesterday, and he is owed

 

         22     800 hours of back pay.

 

         23         Q    BY MR. LOWN:  Are there any other employees who

 

         24     are hourly paid that are owed money?

 

         25         A    Myself.

 

 

 


 

 

                                        PAGE 56

 

 

 

          1         Q    How much do they owe you?

 

          2         A    They owe me about $8,000.00 from prior months.

 

          3         Q    How about other hourly employees?

 

          4         A    As far as I know, hourly wages, they were not

 

          5     paid last week.  This is as of yesterday.

 

          6         Q    Were they paid every week or every two weeks?

 

          7         A    Every two weeks.

 

          8         Q    So the last payday --

 

          9         A    -- was two weeks ago.

 

         10         Q    For the preceding two weeks, they didn't pay the

 

         11     payroll?

 

         12         A    Didn't pay it.

 

         13         Q    Is payroll done on Friday at the end of a

 

         14     two-week period, or is it delayed one week?

 

         15         A    Delayed one week.  It's usually on Thursday.

 

         16         Q    Payroll ends on Friday, and the next Thursday,

 

         17     they get paid for those.

 

         18         A    Yeah.

 

         19         Q    So, actually, at this point, there's another

 

         20     week under the boards.

 

         21         A    Yes.

 

         22         Q    When did you learn that that was the case?  Was

 

         23     that yesterday?

 

         24         A    Well, I learned about it probably Monday, and

 

         25     then, yesterday, I called John Ellis, and he verified

 

 

 


 

 

                                        PAGE 57

 

 

 

          1     that they had not been paid.

 

          2         Q    So, this information is as of yesterday in

 

          3     reference to John Ellis.

 

          4         A    Yeah, very current.

 

          5         Q    How many employees do they have at the present

 

          6     time?

 

          7         A    I think it's ten.

 

          8                  They had about 12 workers from the Czech

 

          9     Republic, and they were not being paid, so they went back

 

         10     home.  John was only paying them about $2.00 an hour, and

 

         11     that caused some problems.

 

         12         Q    There's currently ten employees, and your

 

         13     understanding is there was no payroll at all.

 

         14         A    There was no payroll for them.

 

         15         Q    What's their reaction?

 

         16         A    I don't know personally, but I know the people

 

         17     that worked for me, they are not happy, and I think if

 

         18     they don't get paid next week, they will be gone.

 

         19         Q    Do you know what the law is in Missouri

 

         20     regarding hourly paid workers?

 

         21         A    They have to be paid, and I believe, if they are

 

         22     not paid within a certain period of time, the state will

 

         23     triple what is owed to the workers.

 

         24         Q    Pretty standard.

 

         25         A    Yeah.

 

 

 


 

 

                                        PAGE 58

 

 

 

          1         Q    Has Mr. Jeschky or Mr. Dearden said anything to

 

          2     the employees about what they are going to do about this

 

          3     situation?

 

          4         A    Not that I'm aware of.

 

          5         Q    Now, you said that 12 workers were from the

 

          6     Czech Republic.

 

          7         A    Yes.

 

          8         Q    And they were only being paid $2.00 an hour.

 

          9         A    Right.  John imported these workers on the

 

         10     premise  that they were here to be trained.  In reality,

 

         11     they were here to train others.

 

         12         Q    Does that mean they came on student visas?

 

         13         A    They came on student visas.  They were highly

 

         14     skilled sheet-metal people.

 

         15         Q    BY MR. COMBS:  Did they come with credentials,

 

         16     or you just observed that?

 

         17         A    Oh, they were skilled.  These guys worked in the

 

         18     sheet-metal industry in the Czech Republic.  Well, they

 

         19     came in, and John was paying them $2.00 an hour, and that

 

         20     was not directed to them.  It was being paid to a third

 

         21     party in the Czech Republic, Chip Irwin.  He is president

 

         22     of Czech Airworks.

 

         23         Q    Okay.  So, the $2.00 an hour that they got, they

 

         24     didn't even get that.

 

         25         A    They didn't get that.

 

 

 


 

 

                                        PAGE 59

 

 

 

          1         Q    What did they get?

 

          2         A    Room and board and food.  John housed 12 people

 

          3     in a four-bedroom house with one bathroom, and I can't

 

          4     believe they did that.

 

          5         Q    You have to have a number to go to the bathroom.

 

          6         A    Yeah.  They were doing shift work.

 

          7         Q    BY MR. LOWN:  What was their attitude about

 

          8     that?

 

          9         A    Initially, I guess they were okay.  Two dollars

 

         10     an hour is a lot of money in the Czech Republic, but you

 

         11     can't live on $2.00 an hour here.  They were unhappy. 

 

         12     They wanted living cash, and John refused to give it to

 

         13     them, and eventually, they left.

 

         14         Q    Now, you mentioned Tomas.  What's his status? 

 

         15     Because, I mean, you said he's owed 80 or $90,000.00.

 

         16         A    Right.  He was brought in as director of

 

         17     engineering.  He was given three percent of the company

 

         18     and a salary, which he hasn't been paid yet.  Initially,

 

         19     he was given just enough money to support his family and

 

         20     that's it.  And, just last month, he had to move out of

 

         21     the house he was renting because he couldn't afford it

 

         22     anymore.

 

         23         Q    Now, he's from the Czech Republic, too?

 

         24         A    Yeah, he is a Czech citizen.

 

         25         Q    What kind of visa is he on?

 

 

 


 

 

                                        PAGE 60

 

 

 

          1         A    He's on a working visa tied to Renaissance, so

 

          2     he's kind of backed up against the wall until he finds

 

          3     another job visa.

 

          4         Q    When was the last time you talked to Tomas?

 

          5         A    Monday.

 

          6         Q    What were his feelings at that time?

 

          7         A    He feels that he'll probably be fired any day

 

          8     now.

 

          9         Q    Fired for what reason?

 

         10         A    Well, Linda is very hard to get along with, and

 

         11     she and Tomas don't get along, and the work is not going

 

         12     as fast as she likes, meaning STC work, and he has no

 

         13     control over that.  That's up to FAA.  And, of course,

 

         14     there's no money, so he'll be let go just like the other

 

         15     people.

 

         16                  Peter was the other one.  I can't remember

 

         17     his last name.  You may have it somewhere.  He was

 

         18     another Czech worker there.

 

         19         Q    BY MR. COMBS:  Peter Raddock or something?

 

         20         A    Don't ask me to spell it.  It's Russian.

 

         21                  Peter left.  Peter was never paid, and, you

 

         22     know, he could no longer live within Renaissance's

 

         23     guidelines.

 

         24         Q    BY MR. STONE:  How long ago did the Czech

 

         25     workers leave?

 

 

 


 

 

                                        PAGE 61

 

 

 

          1         A    I believe they left two months ago.

 

          2         Q    And nobody took their place?

 

          3         A    No.

 

          4         Q    Who does that type of work now?

 

          5         A    Well, we had these workers that we hired

 

          6     locally.  They are not skilled enough.  These people were

 

          7     primarily repair technicians from some of the local

 

          8     aviation facilities.  Two of them are straight out of the

 

          9     Navy or Marines.  They've never had any aircraft building

 

         10     experience.

 

         11                  So, the Czech workers were there to train

 

         12     other people in addition to any training that I provided

 

         13     or Tomas provided.

 

         14                  The Czech workers developed some of the

 

         15     techniques for producing the parts, but they held it

 

         16     until John paid them.  John refused to pay them, so they

 

         17     never turned the documentation over to John.  As a

 

         18     consequence, John had to buy additional parts from

 

         19     Univair, one of them being the wing lift struts, which

 

         20     are about a thousand dollars apiece.

 

         21         Q    BY MR. COMBS:  What paperwork was that?

 

         22         A    Their job was to develop the technique to

 

         23     produce parts.  They would do a trial run, they write it

 

         24     down, develop the technique and give it to John to

 

         25     incorporate into the production work orders.  But they

 

 

 


 

 

                                        PAGE 62

 

 

 

          1     caught on fast, and they wanted money, and John wouldn't

 

          2     give them money, so they left, and they took the data

 

          3     with them.

 

          4         Q    How long had they been there?

 

          5         A    About six months.

 

          6         Q    BY MR. LOWN:  Well, if they're not able to pay

 

          7     their workers and they don't have money to buy parts, how

 

          8     are they going to move forward and move into this

 

          9     building?  What is your impression?

 

         10         A    Well, Renaissance is technically and legally

 

         11     bankrupt, so I don't know how they are going to continue.

 

         12         Q    BY MR. COMBS:  You had commented, at one point,

 

         13     that you thought he was technically bankrupt over a year

 

         14     ago.

 

         15         A    Yes.  At the point where our salaries were cut

 

         16     back and we had to, you know, shuffle creditors around, 

 

         17     I knew we were bankrupt.  Kurt Jeschky was playing phone

 

         18     tag with creditors.

 

         19         Q    BY MR. COMBS:  So, that was June or July of last

 

         20     year.

 

         21         A    Actually, that started in April, when I

 

         22     initially employed, because Linda would get telephone

 

         23     calls from creditors in Georgia.  And I didn't know what

 

         24     the game was, but they were just chasing someone around.

 

         25         Q    BY MR. LOWN:  Do you know what creditors?  Do

 

 

 


 

 

                                        PAGE 63

 

 

 

          1     you know the names of any of these creditors?

 

          2         A    I know the Bank of Georgia was calling.

 

          3         Q    We're talking about the Bank of Georgia. 

 

          4     There's several banks.  Are we talking about the Bank of

 

          5     Dodge?

 

          6         A    I don't know for sure.

 

          7                  The people producing brochures were calling,

 

          8     because they weren't being paid.  The people we leased

 

          9     equipment from were calling, because they weren't being

 

         10     paid.  Between Linda and Kurt, they shuffled these people

 

         11     around.

 

         12         Q    So, basically, in April, well before the

 

         13     arbitration hearing anyway, they were already in serious

 

         14     financial trouble.

 

         15         A    Yes.

 

         16         Q    BY MR. COMBS:  And they came to the arbitration

 

         17     hearing and presented the face that they had just

 

         18     received seven million dollars worth of funding, and they

 

         19     were in good financial health, and they were going to

 

         20     produce ten airplanes by the end of the year.

 

         21         A    We never had that kind of money in the company. 

 

         22                  (Whereupon a short recess took place.)

 

         23         Q    BY MR. LOWN:  Fred, it seems like for the past

 

         24     year until you were terminated, that you were fairly

 

         25     intimately involved in the operations there.

 

 

 


 

 

                                        PAGE 64

 

 

 

          1                  In the course of your conversations with

 

          2     John Dearden and Kurt Jeschky, or anyone else, how much

 

          3     discussion did you hear regarding the various litigation

 

          4     that was going on, meaning both in Georgia and here?

 

          5         A    Well, most of the data that I came across were

 

          6     faxes concerning the foundation litigation from Arizona. 

 

          7     You know, Tomas and I would usually skim through the

 

          8     faxes that would come through.

 

          9                  As far as the Georgia litigation, I didn't

 

         10     have a lot of contact with that, because that was all

 

         11     prior to my employment, and when John discussed it, it

 

         12     was superficial.

 

         13         Q    What impression did John convey regarding the

 

         14     Georgia litigation?

 

         15         A    Well, the Georgia litigation, he felt that it

 

         16     was an unmerited case.

 

         17         Q    Sure.

 

         18         A    And that's why he was striving to get it thrown

 

         19     out.

 

         20         Q    Did John, or anyone else, ever mention the

 

         21     Maryland litigation to you?

 

         22         A    No.

 

         23         Q    So, no one ever mentioned that.

 

         24                  Did John, or anyone else, ever discuss the

 

         25     cost of all this litigation?

 

 

 


 

 

                                        PAGE 65

 

 

 

          1         A    Absolutely not.

 

          2         Q    You don't have any information regarding the

 

          3     amount of their legal fees?

 

          4         A    The only thing that I heard was that the firm

 

          5     that Eric Rowe worked for was unhappy that they were not

 

          6     getting paid.

 

          7         Q    BY MR. COMBS:  When was that?

 

          8         A    That would have been, in fact, that happened the

 

          9     week before we came to Arizona for testimony.  I believe

 

         10     John had to make a payment to that firm to ensure that

 

         11     Eric Rowe would come down here.

 

         12         Q    BY MR. LOWN:  Do you have any idea how much he

 

         13     paid?

 

         14         A    Ten thousand seems to stick in my mind.

 

         15         Q    Do you know what the bill was for that ligation?

 

         16         A    I don't know.

 

         17         Q    If I told you it was $320,000.00, what effect do

 

         18     you think that would have on the viability of the

 

         19     operation down there?

 

         20         A    I don't know how they would collect, but it

 

         21     would shut it down.

 

         22         Q    Did John ever talk about the arbitration award?

 

         23         A    Yes.  I had a copy of one of the last issues of

 

         24     the arbitration award.  He didn't personally discuss it

 

         25     with me, but I had a copy of it.

 

 

 


 

 

                                        PAGE 66

 

 

 

          1         Q    But you never actually had a conversation with

 

          2     anybody regarding that?

 

          3         A    No, other than he stressed that all the legal

 

          4     fees would be paid for by the foundation.

 

          5         Q    Did he give you any idea what the probability of

 

          6     collecting that award was?

 

          7         A    He felt pretty high.

 

          8         Q    Was he relying on that?

 

          9         A    I think they were counting on that money,

 

         10     particularly Linda Dearden.  She was very proactive in

 

         11     the company as far as the financial side goes, and she

 

         12     was counting on that money.

 

         13         Q    Do you know if Eric Rowe or his firm ever made

 

         14     any representations -- you mentioned the letter they

 

         15     wrote or something happened.

 

         16                  Do you know of any other representations

 

         17     they might have made regarding the status of this in the

 

         18     state of Missouri?

 

         19         A    None that I'm aware of.

 

         20              MR. LOWN:  That's all I have for you.

 

         21                  It's all yours.

 

         22              MR. STONE:  Are you talking to me?

 

         23              MR. LOWN:  Yeah.

 

         24         Q    BY MR. STONE:  Fred, at the arbitration hearing

 

         25     that took place in August 2001, Renaissance presented

 

 

 


 

 

                                        PAGE 67

 

 

 

          1     certain projections as to the sales price of aircraft,

 

          2     the cost of the production and the profit margin that

 

          3     they projected.  Are you familiar with those?

 

          4         A    Yes, I am.

 

          5         Q    Were those projections that were presented at

 

          6     the arbitration hearing realistic?

 

          7         A    No, absolutely not.

 

          8         Q    Why not?

 

          9         A    Because I had made my own estimates of what the

 

         10     price of aircraft should be.  I had discussions with Kurt

 

         11     in the past that $74,500.00 was unrealistically low for

 

         12     that aircraft.  And I did a projection based on the first

 

         13     delivery of ten ships per year, and then another one for

 

         14     100 aircraft per year.  Exclusive of executive salaries

 

         15     and labor, the price for each aircraft is a minimum of

 

         16     $47,350.00.  That's the cost of raw materials, engine

 

         17     purchase, parts, that kind of thing.

 

         18         Q    BY MR. COMBS:  There's no labor in that?

 

         19         A    No, there's no labor in that.  When you add

 

         20     labor and executive salaries in, and the executive

 

         21     salaries I have, because I was part of the team, and that

 

         22     came out to $373,000.00 a year for executive salaries.

 

         23                  Labor I had to guesstimate.  We had

 

         24     approximately 20 workers, and the average wage, including

 

         25     benefits, Social Security, about $20.00 an hour, and that

 

 

 


 

 

                                        PAGE 68

 

 

 

          1     comes out to roughly $800,000.00 per year.

 

          2                  When you amortize these over ten aircraft,

 

          3     that adds an additional $117,300.00 per aircraft, and if

 

          4     you amortize it over a hundred aircraft, it's $11,730.00. 

 

          5     And, bear in mind, this does not include any profit,

 

          6     overhead expenses, like for building, property, equipment

 

          7     or office expenses.

 

          8         Q    BY MR. STONE:  What about insurance?

 

          9         A    No insurance.

 

         10                  So, I mean, the minimum that I can see the

 

         11     aircraft costing, ten ships, would be $264,650.00 apiece. 

 

         12     For a hundred aircraft, $59,800.00 each.

 

         13         Q    BY MR. LOWN:  That's without all the fixed

 

         14     costs?

 

         15         A    That's without all the additional fixed costs

 

         16     that I previously outlined or profit.

 

         17         Q    Or insurance.

 

         18         A    Or insurance.

 

         19                  And these are not unrealistic numbers,

 

         20     because they actually bode very well with the rest of the

 

         21     aircraft industry.  The reason a Cessna 172 is

 

         22     $174,000.00 is because of all the overhead they carry.

 

         23         Q    BY MR. COMBS:  Was Mr. Jeschky familiar with

 

         24     these kind of numbers when he went to the arbitration, do

 

         25     you think?

 

 

 


 

 

                                        PAGE 69

 

 

 

          1         A    I don't know if he used these numbers, as I did,

 

          2     but I know that he knew that $74,500.00 was an

 

          3     unrealistic number.

 

          4         Q    BY MR. LOWN:  How do you know that?

 

          5         A    Because Jeschky is a very smart man, and he

 

          6     purchased every single part that was put on the 99 Romeo

 

          7     Alpha, so he knows the cost of parts.

 

          8         Q    Did you ever have discussions about this with

 

          9     either he or John Dearden?

 

         10         A    Not with John, but I have talked to Kurt.

 

         11                  The price had to go up, and he did inform me

 

         12     at one time that after Oshkosh the price would go up, but

 

         13     he didn't tell me how much, but it would go up.  But I

 

         14     would have thought it would be a marginal amount, not to

 

         15     discourage buyers.

 

         16         Q    But your estimate of the costs, you made that

 

         17     known to Kurt prior to the August arbitration.

 

         18         A    No.  I discussed that with Kurt right after

 

         19     Oshkosh.

 

         20         Q    Which was?

 

         21              MR. COMBS:  Last year.  It was just before the

 

         22     arbitration.

 

         23              THE WITNESS:  Yeah.  I was there for one day,

 

         24     also.

 

         25         Q    BY MR. LOWN:  So, at the time of the

 

 

 


 

 

                                        PAGE 70

 

 

 

          1     arbitration, though, they either knew that your opinion

 

          2     was that the cost was unrealistic, or they should have

 

          3     known.

 

          4         A    Right, right.  I think we all knew, within the

 

          5     management circle, that that cost was too low.

 

          6         Q    BY MR. COMBS:  So, if they were testifying to a

 

          7     $30,000.00 profit margin on an $75,000.00 airplane, that

 

          8     would have been incorrect.

 

          9         A    Kurt definitely should have known that that is

 

         10     not a feasible number for any manufacturer, that kind of

 

         11     profit margin.

 

         12         Q    BY MR. STONE:  Was there any reasonable

 

         13     expectation of selling a hundred aircraft per year?

 

         14         A    I think there was on my part.  I felt that if I

 

         15     had produced the aircraft per the drawing without any

 

         16     changes, I could have gotten to that point with three

 

         17     shifts and enough people.

 

         18         Q    BY MR. COMBS:  Can we backtrack to that.

 

         19                  By per the drawing, you mean without

 

         20     reengineering things like the instrument panel, and the

 

         21     flaps, and the landing gear, and brakes?

 

         22         A    Correct, an original aircraft with none of the

 

         23     things that John wanted.

 

         24         Q    BY MR. LOWN:  So, STC changes that John

 

         25     incorporated in the airplane substantially increased the

 

 

 


 

 

                                        PAGE 71

 

 

 

          1     price to produce the airplane.

 

          2         A    Well, not only that.  That is actually one of

 

          3     the prime reasons for delay in production.

 

          4         Q    BY MR. COMBS:  So, incorporating the STCs is the

 

          5     reason for the delay.

 

          6         A    Yes.  It's getting the FAA to certify them.

 

          7         Q    And that process had nothing to do with the

 

          8     dispute.

 

          9         A    No.  That process is beyond Renaissance's

 

         10     control, or beyond the foundation's control. 

 

         11         Q    If it had been started five years earlier, 

 

         12     things might have happened by now.

 

         13         A    Yeah.

 

         14         Q    So that would be a management decision at

 

         15     Renaissance, not something from the outside.

 

         16         A    Right.  Five years ago, had they started doing

 

         17     STCs, they would have been done, and it would have been a

 

         18     very simple process to incorporate into new production

 

         19     aircraft.

 

         20         Q    When did John tell you about incorporating all

 

         21     these changes by STC?

 

         22         A    It would have been the summer of 2001 when we

 

         23     really got involved in discussing production.

 

         24         Q    Before or after the arbitration?

 

         25         A    Before the arbitration.

 

 

 


 

 

                                        PAGE 72

 

 

 

          1                  We already had a pretty lengthy list of STCs 

 

          2     to do, and John's philosophy is if we cannot get data

 

          3     from the foundation, we would just produce our own STCs

 

          4     to get the changes we needed.

 

          5                  And, in fact, items like the fuel system,

 

          6     Renaissance does not have a drawing for.  It's going to

 

          7     be part of an STC to certify the aircraft.  The flaps,

 

          8     John doesn't have a drawing, so that is also an STC. 

 

          9         Q    Were you aware that he had access to all of

 

         10     those?

 

         11         A    Yes, I was.  But it always puzzled us why he

 

         12     didn't obtain access to them.

 

         13                  I mean, the flaps were a very chaotic

 

         14     exercise, because we have no way to produce the flaps, so

 

         15     Tomas had to reverse engineer them.  Of course, the

 

         16     changes in the travel of the flaps made it a mandatory

 

         17     STC.

 

         18         Q    BY MR. LOWN:  So, changes were dictated by John

 

         19     that made a mandatory STC.  Do you know when John

 

         20     dictated those changes?

 

         21         A    I don't recall the exact time line.  This has

 

         22     been a continuing process.

 

         23                  All the STCs were dictated by John.  I did

 

         24     not initiate any, and Tomas did not initiate any, except

 

         25     possibly -- well, John initiated the toe-brakes, but

 

 

 


 

 

                                        PAGE 73

 

 

 

          1     Tomas felt that was a good change, and he did take full

 

          2     ownership of that process.  But to this day, it has not

 

          3     yet been approved.

 

          4         Q    The thing I want to make sure of, for the

 

          5     record, is that all of these STCs involved production

 

          6     issues that are not involved in access to the original

 

          7     drawings.

 

          8         A    Absolutely.

 

          9         Q    So, there are no toe-brakes in the original

 

         10     drawings?.

 

         11         A    That is correct.

 

         12         Q    So, John Dearden's decision to include

 

         13     toe-brakes requiring the STC was a major cause of delay

 

         14     in producing the airplane.

 

         15         A    Yes.

 

         16         Q    And the same thing would be true of the decision

 

         17     to go to flaps 40 rather than flaps 35.

 

         18         A    Right.  Essentially, you can produce almost a

 

         19     complete aircraft without the drawings that we were

 

         20     missing.  The only thing is, like the fuel system, it

 

         21     would have been nice to have that drawing, but that

 

         22     drawing is still missing.

 

         23                  John decided to go to the rubber bladder

 

         24     tanks, and we have no drawing for that.

 

         25         Q    BY MR. COMBS:  You're talking about effective

 

 

 


 

 

                                        PAGE 74

 

 

 

          1     your leaving in January, right?

 

          2         A    Right.

 

          3         Q    Those drawings have been provided in late

 

          4     January.

 

          5         A    Okay.

 

          6              MR. LOWN:  Randall? 

 

          7              MR. STONE:  I can't think of anything else on

 

          8     that.

 

          9              MR. LOWN:  Did you cover all of those questions?

 

         10         Q    BY MR. STONE:  Fred, different subject.

 

         11                  At the arbitration hearing, again in August

 

         12     of 2001, Renaissance alleged that the foundation had

 

         13     failed to provide all the drawings they were required to

 

         14     provide under the license agreement, and that that caused

 

         15     Renaissance delay in producing these aircraft.

 

         16                  How would you assess that allegation?

 

         17         A    I think that was basically incorrect.  Although,

 

         18     it would have been nice to have the drawings, I did not

 

         19     absolutely need them to commence production.

 

         20         Q    So, in other words, you had all the drawings

 

         21     that you needed to produce the aircraft.

 

         22         A    I would say 99 percent of the drawings.  Except

 

         23     for those drawings that we already discussed that were

 

         24     missing, we had all the other drawings.

 

         25                  Now, what John is probably discussing, or

 

 

 


 

 

                                        PAGE 75

 

 

 

          1     talking about, is he wanted historical manufacturing work

 

          2     orders so that he can duplicate the original

 

          3     manufacturing process.  But that was not essential to

 

          4     producing the airplane, because we could have developed

 

          5     our own process.

 

          6         Q    Okay.

 

          7         A    And that issue we did discuss several times.

 

          8         Q    So, in other words, you don't believe that the

 

          9     foundation not providing some drawings, if that's true,

 

         10     caused any delay in the production of the aircraft.

 

         11         A    That's correct.

 

         12         Q    And do you remember your testimony in the

 

         13     arbitration hearing in August of 2001?

 

         14         A    I don't recall specifically any of my testimony.

 

         15         Q    Do you recall testifying?

 

         16         A    Yes, I did testify during that period of time.

 

         17         Q    Looking back on that testimony, from what you

 

         18     know today, what's transpired since, was there anything

 

         19     in your testimony in the arbitration hearing that you now

 

         20     believe to be false or misleading?

 

         21         A    Yes.  My testimony to the fact that we were

 

         22     going to build ten aircraft by the end of the year was

 

         23     misleading and incorrect.

 

         24         Q    Anything else?

 

         25         A    Well, I knew at the time that we could not build

 

 

 


 

 

                                        PAGE 76

 

 

 

          1     those ten aircraft, and Mr. Jeschky knew it, and Tomas

 

          2     Straka knew it.  We had argued the issue with John, but

 

          3     he was very adamant, and word came out that we would

 

          4     build ten aircraft, at which point I had ten details

 

          5     subassemblies in work, and that was considered to be ten

 

          6     aircraft in progress.

 

          7              MR. COMBS:  If you want to go off the record, I

 

          8     can let him review his testimony.

 

          9                  (Whereupon an off-the-record discussion took

 

         10     place.)

 

         11         Q    BY MR. STONE:  Fred, are you knowledgeable with

 

         12     the information that was presented by Renaissance to the

 

         13     State of Missouri as part of the financial package that

 

         14     was coming from Missouri?

 

         15         A    I am knowledgeable from a casual standpoint.

 

         16         Q    Did you ever see any of the documents that were

 

         17     presented to Missouri?

 

         18         A    I seen some of the documents, financial

 

         19     statement for the company.

 

         20         Q    From the things you have seen that were

 

         21     presented to Missouri, is there anything in there that

 

         22     you consider to be false our misleading?

 

         23         A    Yes.  I felt the company's sales projections

 

         24     were false.

 

         25         Q    How so?

 

 

 


 

 

                                        PAGE 77

 

 

 

          1         A    They were way too optimistic.  John claimed that

 

          2     we would be, I think, producing as many as 162 aircraft

 

          3     on the second year of production.  That was unrealistic. 

 

          4     Also, the projections for local employment was

 

          5     unrealistic.

 

          6         Q    Tell me about those.

 

          7         A    We had a schedule to employ locals that took us

 

          8     up to 200 employees on the third year of production.

 

          9         Q    Okay.

 

         10         A    And we did not have local talent to even hire

 

         11     that many people if we had the money.  But the facilities

 

         12     that we were building, it was a 48,000-square-foot

 

         13     building, could not house that many people even with

 

         14     three shifts involved.  Further, we didn't have enough

 

         15     tools to keep 200 people employed full time.

 

         16         Q    Okay.  Was there a representation as to the

 

         17     assets of the company?

 

         18         A    I don't know whether it was exact, but I think

 

         19     the State of Missouri may have been led to believe that

 

         20     the company owned all the assets that were located in the

 

         21     Cape Girardeau facility.

 

         22         Q    I think you discussed before about some of those

 

         23     assets were assets that came from Georgia.

 

         24         A    Correct.  There was tooling and dies, inventory,

 

         25     office equipment, that kind of thing.

 

 

 


 

 

                                        PAGE 78

 

 

 

          1         Q    Anything else concerning the information

 

          2     presented to Missouri that you consider to be false or

 

          3     misleading?

 

          4         A    I don't recall anything at this time.

 

          5         Q    Have you ever seen a private placement

 

          6     memorandum that was prepared by Renaissance?

 

          7         A    No, I never have.

 

          8         Q    Were you aware that Renaissance, Mr. Dearden and

 

          9     Mr. Vanhorn were involved in a lawsuit in Maryland?

 

         10         A    No, I was not, until just a few days ago.

 

         11         Q    Are you aware of any other lawsuits in Maryland,

 

         12     Georgia and Arizona, which we talked about, that they are

 

         13     involved in?

 

         14         A    The only lawsuits that I was aware of at that

 

         15     time were the lawsuits in Georgia and, of course, with

 

         16     the foundation in Arizona.

 

         17         Q    And you haven't heard about any others in

 

         18     Maryland?

 

         19         A    No.

 

         20         Q    When you left Renaissance, what were the reasons

 

         21     that you left?

 

         22         A    I was fired by John.  We had a disagreement over

 

         23     performance, and prior to that, we had a disagreement

 

         24     over quality issues, and he felt we were not of the same

 

         25     mind.

 

 

 


 

 

                                        PAGE 79

 

 

 

          1         Q    And I think you already said that the company

 

          2     Renaissance owes you money for past due salary.

 

          3         A    Yes.

 

          4         Q    Who took your place at Renaissance?

 

          5         A    A gentleman named Richard Gill.  He was an

 

          6     employee of mine.

 

          7         Q    And how long had he been with Renaissance?

 

          8         A    Just a few months.  Technically, he's not

 

          9     qualified for the job, so I don't know how they're going

 

         10     to sell that to the government.

 

         11         Q    And your position was production manager.

 

         12         A    I was director of quality, and I also, prior to

 

         13     December, had responsibility for production, also.

 

         14         Q    Okay.  And the man you just talked about, he

 

         15     took all of your responsibilities?

 

         16         A    No, he just has the quality side.

 

         17         Q    Okay.  Who took your place otherwise?

 

         18         A    For production, we had a gentleman named Dan. 

 

         19     I'm sorry.  I can't recall his last name now, but he also

 

         20     has been fired recently.

 

         21         Q    Okay.

 

         22         A    Now we have one of the production employees 

 

         23     fulfilling the role of production manager.  Although, for

 

         24     a time, Linda Dearden was production manager, and so was

 

         25     Kurt Jeschky.

 

 

 


 

 

                                        PAGE 80

 

 

 

          1         Q    And Linda Dearden, does she have any

 

          2     qualifications to be production manager that you know of?

 

          3         A    No.

 

          4         Q    What about Mr. Jeschky?

 

          5         A    Kurt does not have any production experience,

 

          6     either.

 

          7         Q    And you just mentioned a gentleman's name.  I

 

          8     forgotten that name you said.  You did not believe he was

 

          9     qualified.

 

         10         A    That's correct.

 

         11         Q    What's his name again?

 

         12         A    On the production side.  That was on the quality

 

         13     side.  It's Richard Gill.  He was a gentleman I hired who

 

         14     had just gotten out of the Marines, I believe.  He

 

         15     doesn't have any quality background.  And the gentleman

 

         16     fulfilling the production side is Jack Leighton.

 

         17         Q    Okay.

 

         18         A    He's a very good technician, but he doesn't have

 

         19     any management experience.

 

         20         Q    Okay.  And what about Mr. Gill?

 

         21         A    Mr. Gill is a very young man, doesn't really

 

         22     have any industrial experience.

 

         23         Q    Is he qualified to do the job at Renaissance?

 

         24         A    No.

 

         25         Q    Has there been any -- you talked about the

 

 

 


 

 

                                        PAGE 81

 

 

 

          1     employees that are leaving, employees are not being paid.

 

          2                  Are any new employees coming in?

 

          3         A    Well, the employees that left were the Czech

 

          4     workers.  They were not being paid, and John refused to

 

          5     remunerate them in any way, so they left and went back to

 

          6     the Czech Republic.  There are no new employees coming

 

          7     in, and I suspect if they don't get paid next week, that

 

          8     the rest of the employees might also leave.

 

          9         Q    Okay.

 

         10         A    There's also a gentleman named John Ellis, and

 

         11     he is owed 800 hours of back pay.

 

         12         Q    BY MR. COMBS:  What's his pay rate?

 

         13         A    I think's about $18.00 an hour.

 

         14         Q    BY MR. STONE:  What was his position?

 

         15         A    He was my lead man.  He's a very experienced

 

         16     gentleman.  He would do a lot of troubleshooting for me.

 

         17         Q    Okay.  And, as part of your employment contract

 

         18     there, were you to receive an ownership interest in the

 

         19     company Renaissance?

 

         20         A    Yes, I was granted a one-percent ownership with

 

         21     the company if I stayed with the company for one year,

 

         22     but I was vested at one half percent after six months of

 

         23     employment.

 

         24         Q    So, how much, to your understanding, is it that

 

         25     you're entitled to ownership at this point?

 

 

 


 

 

                                        PAGE 82

 

 

 

          1         A    At this point, I believe I'm entitled to a half

 

          2     percent ownership.

 

          3         Q    When you entered into that agreement, did

 

          4     Renaissance tell you who the other owners of Renaissance

 

          5     were?

 

          6         A    No.  Other than John and Kurt, I had no

 

          7     knowledge of any other owners.  I'm sorry, and Tomas.

 

          8         Q    As of today, do you know any additional owners

 

          9     of Renaissance?

 

         10         A    No.

 

         11              MR. STONE:  Okay.  Pete, I will turn it back

 

         12     over to you right now.

 

         13         Q    BY MR. LOWN:  I just found some testimony I want

 

         14     to cover briefly.

 

         15                  Earlier, you talked about engines they

 

         16     ordered when they were in Georgia.

 

         17         A    Yes.

 

         18         Q    How many engines did you say were ordered?

 

         19         A    Originally, five engines were ordered.  I was

 

         20     told that by Kurt.

 

         21         Q    Okay.  In his August testimony, Kurt Jeschky

 

         22     talked about these engines.  He says that they ordered

 

         23     four, and then returned three of them.  Absent the

 

         24     discrepancy in total numbers, Mr. Jeschky says, and I'll

 

         25     quote, when asked why the engines were postponed, he

 

 

 


 

 

                                        PAGE 83

 

 

 

          1     says, "Because of the -- why we're here, because of the

 

          2     delay, things that were filed with the FAA."

 

          3                  Is that a true statement?

 

          4         A    No.

 

          5         Q    What was the real cause of the cancellation of

 

          6     those orders?

 

          7         A    Renaissance could not pay for those engines.

 

          8              MR. LOWN:  Doug, do you want to pick up?

 

          9              MR. COMBS:  Well, if you've got something

 

         10     marked, go ahead and take care of it.

 

         11              MR. LOWN:  Go ahead.  It's all yours.

 

         12         Q    BY MR. COMBS:  You commented to me in a

 

         13     conversation the other day that you wished you had known

 

         14     more about John Dearden when you started all this.  And

 

         15     then you said something, I think this is right, but

 

         16     restate it if isn't, "It's his way or no way."

 

         17                  Can you explain what that meant.

 

         18         A    Well, when John has an idea, there's no room for

 

         19     negotiation.

 

         20                  A good example is the issue of the

 

         21     additional flap travel.  We argued with him vehemently

 

         22     about leaving it alone, but since his own personal

 

         23     aircraft, Romeo Alpha, has 40 degrees of travel, he

 

         24     demands that the production aircraft also have 40 degrees

 

         25     of travel.  And so, Tomas was forced to pursue the

 

 

 


 

 

                                        PAGE 84

 

 

 

          1     process of obtaining that travel, which involves a lot of

 

          2     structural changes to the aircraft.

 

          3         Q    Will it not always involve flight test and stall

 

          4     test?

 

          5         A    Yes, it will involve flight and stall tests.

 

          6         Q    And spin certification?

 

          7         A    And spin certification.

 

          8         Q    Do you have any guesstimate as to what that kind

 

          9     of change might cost the company to take to

 

         10     certification?

 

         11         A    Spin certification might wind up costing about

 

         12     $50,000.00, because you do have to pay a certified test

 

         13     pilot, and the FAA has to provide their own test pilot. 

 

         14     Plus, you have to provide the dynamic analysis for the

 

         15     spin test.

 

         16         Q    I know you weren't in Georgia, but you came on

 

         17     after they moved everything from Georgia.  I was

 

         18     wondering if you can tell us anything generally about

 

         19     that move, that you might have heard or understood from

 

         20     talking with people, as far as prior business, or the

 

         21     reasons they made the move, or anything like that?

 

         22         A    Well, what I had heard was that the county that

 

         23     they were located in, I guess Eastman, had reneged on a

 

         24     promise for a facility and other financial incentives, so

 

         25     they were shopping for a better deal.

 

 

 


 

 

                                        PAGE 85

 

 

 

          1                  And, apparently, the City of Cape Girardeau,

 

          2     which also happens to be where Matt Heinz had proposed to

 

          3     build a facility, made a proposal to John Dearden.  Matt

 

          4     Heinz apparently was going to move his operation to Cape

 

          5     Girardeau, and the city had promised him a lot of tax

 

          6     incentives and new building, and Matt Heinz reneged on

 

          7     the deal.  So the city was left without an employer, and

 

          8     so they made the offer to Renaissance Aircraft.

 

          9         Q    BY MR. COMBS:  So, you didn't know anything at

 

         10     all of their prior business back in Georgia.

 

         11         A    They had not produced any parts whatsoever,

 

         12     other than aircraft 99 Romeo Alpha.  That was the only

 

         13     aircraft they ever made.  And although John asserts that

 

         14     that is a first-production aircraft, it is not a

 

         15     production aircraft.  It never has been.

 

         16         Q    That was actually, I think, produced up in

 

         17     Michigan.

 

         18         A    Right.  And that was produced as a home-built

 

         19     aircraft, amateur-built aircraft, and it is certified as

 

         20     such.

 

         21         Q    I'm going to read you some testimony here.  This

 

         22     is from John Dearden on day one.  It's page 148 at line

 

         23     two.  Let me back up here a second to page 147, line 15.

 

         24                  "Our business plan carries an estimate of

 

         25     about 2,400 man-hours for the first 50 aircraft or 20

 

 

 


 

 

                                        PAGE 86

 

 

 

          1     aircraft.  I don't remember exactly.  And we built that 

 

          2     airplane between, because of some imprecision, it was not

 

          3     less than 1500 man-hours, but not more than 1800

 

          4     man-hours."

 

          5                  This is talking about 999 Romeo Alpha.

 

          6                  I believe the question was:  "What was your

 

          7     original projection for getting into production?  After 

 

          8     you paid the 125,000, what was your original plan as far

 

          9     as the time period --

 

         10                  "Answer:  One year.

 

         11                  "Question:  -- to get into production?

 

         12                  "Answer:  Setting everything up.  At that

 

         13     time, we were going to use Zenaire to probably tool up

 

         14     for parts production, setting up things in the Czech

 

         15     Republic.  And we anticipated, actually anticipated

 

         16     production with probable first delivery one year from the 

 

         17     point that we paid the license fee.

 

         18                  "Question:  So, that would have been 1998;

 

         19     is that right?

 

         20                  "Answer:  Right.

 

         21                  I'm going to stop there for a second and ask

 

         22     you, does that sound like a reasonable projection to you,

 

         23     given what you have in the way of production materials

 

         24     available to date?

 

         25         A    Well, first off, Romeo Alpha was put together

 

 

 


 

 

                                        PAGE 87

 

 

 

          1     with highly skilled people.  As I understand it, the

 

          2     people who participated in that project were engineers, 

 

          3     people with many, many years of experience in the

 

          4     sheet-metal industry.  So, that could not realistically

 

          5     reflect a real-world production environment.

 

          6                  Secondly, Zenaire has never had the

 

          7     capability to produce the parts that John needs, either

 

          8     in the states, in the United States, or in the Czech

 

          9     Republic.  They would have had to produce tools from

 

         10     scratch, which is a very lengthy and expensive process in

 

         11     the Czech Republic.

 

         12         Q    So, his estimate of delivering aircraft a year

 

         13     after starting was unrealistic.

 

         14         A    It would never happen.

 

         15         Q    Okay.  Let me continue on here at page 149, line

 

         16     six.

 

         17                  "Question:  Did there come a time later in

 

         18     the year 1999 when you were prepared to commence

 

         19     production?

 

         20                  "Answer:  Yes.

 

         21                  "Question:  When was that?

 

         22                  "Answer:  That was the end of November 1999. 

 

         23     We had pretty much gotten our documentation into what we

 

         24     felt was sufficient order to initial production.  We had

 

         25     contacted the FAA.  We had the forms we needed.  We

 

 

 


 

 

                                        PAGE 88

 

 

 

          1     brought in a team of Czech aircraft workers from the

 

          2     Czech Republic.

 

          3                  "We had people we hired in Georgia.  We had

 

          4     arranged for a half a million dollar financing from the

 

          5     Bank of Dodge County, and we were ready to go the end of

 

          6     October."

 

          7                  That was, again, in Georgia in 1999.  That's

 

          8     the same stuff that they brought to Missouri a year

 

          9     later.

 

         10                  Were they prepared to go to production at

 

         11     that point in time in your opinion?

 

         12         A    There's no way.  I know for a fact that the only

 

         13     thing ever produced in Georgia was a rudder assembly,

 

         14     which I had available to me in Cape Girardeau.

 

         15         Q    Okay.

 

         16         A    Which is a very simple structure.  Not much

 

         17     tooling is required.  Other than that, Renaissance did

 

         18     not produce anything in Georgia, nor did they have the

 

         19     capabilities to do it.

 

         20         Q    The other question I wanted to ask is, he was

 

         21     talking about financing being available, and they had 

 

         22     arranged for a $500,000.00 credit line.

 

         23                  Would a $500,000.00 credit line have been

 

         24     enough to start their aircraft production operation with

 

         25     an aircraft like this?

 

 

 


 

 

                                        PAGE 89

 

 

 

          1         A    No.  First of all, salaries would have eaten

 

          2     most of that money very quickly.  And secondly,

 

          3     production tooling is very expensive.

 

          4                  By production tooling, I mean machines to

 

          5     load and make parts on.  A typical hydraulic forming

 

          6     press costs about $80,000.00.   That's just one press. 

 

          7     He would need shears, drill presses.  Easily, $300,000.00

 

          8     would have been consumed very quickly.

 

          9         Q    What would be your guess that it would have

 

         10     taken to set up operations at a minimum?

 

         11         A    Minimal operation, there's no way you could have

 

         12     done it with less than about two million dollars.

 

         13         Q    Okay.  Were there any comments about how the

 

         14     foundation engaged in the process in Georgia that you

 

         15     were ever privy to?

 

         16         A    Well, I mean, as a member of the team, there was

 

         17     always villainizing of the foundation and, of course, I

 

         18     was only privy to one side of this argument.  But the

 

         19     general line was that the foundation was always at fault.

 

         20         Q    For everything?

 

         21         A    Well, for the delays involved in the production,

 

         22     for John's failure to obtain financing.

 

         23         Q    The foundation was responsible for that?

 

         24         A    Well, I guess it was the litigation process that

 

         25     was tying up John's hands.

 

 

 


 

 

                                        PAGE 90

 

 

 

          1                  (Whereupon a short recess took place.)

 

          2         Q    BY MR. STONE:  Fred, what is a production

 

          3     aircraft?

 

          4         A    I'm sorry.  State the question again.

 

          5         Q    What is a production aircraft?

 

          6         A    A production aircraft is essentially any

 

          7     aircraft that's built in a series of more than one.  If

 

          8     you have two, you have a production of two.

 

          9                  Help me along here.  What else would you

 

         10     want? 

 

         11         Q    BY MR. COMBS:  Did you know the difference

 

         12     between certified and production?

 

         13              MR. STONE:  I'm sorry.  I got distracted.

 

         14              MR. LOWN:  What's the next question, Randall?

 

         15         Q    BY MR. STONE:  Which steps do you have to go

 

         16     through as far as FAA to have a production aircraft?

 

         17         A    To have a certified production aircraft, you

 

         18     have to prove to FAA that you have a quality system

 

         19     in-house that's capable of producing an aircraft per the

 

         20     drawings and specifications as approved by the FAA.

 

         21         Q    Okay.  As of the date that you left Renaissance,

 

         22     had Renaissance ever produced a production aircraft?

 

         23         A    No.  The only aircraft that is claimed to be a

 

         24     production aircraft is 99 Romeo Alpha.  It is actually a

 

         25     home-built aircraft and in no way represents a production

 

 

 


 

 

                                        PAGE 91

 

 

 

          1     aircraft.

 

          2         Q    Has Renaissance ever represented that that

 

          3     aircraft was a production aircraft?

 

          4         A    Yes, and it still does.  In its literature, it

 

          5     lists it as the first production aircraft.

 

          6         Q    But it's your testimony that it is not a

 

          7     production aircraft.

 

          8         A    Absolutely not.  That is an amateur-built

 

          9     aircraft.  It was built by amateurs, and the FAA

 

         10     considers it as such.

 

         11         Q    How long, if ever, before Renaissance will be

 

         12     able to produce a production aircraft?

 

         13         A    I don't believe they'll ever be able to get to

 

         14     that point.  They don't have the resources or the skills

 

         15     to do that.

 

         16         Q    Okay.  Did you ever have any safety concerns

 

         17     while you were employed with Renaissance as far as the

 

         18     safety of aircraft?

 

         19         A    Yes.  I still have several concerns,

 

         20     particularly about the two aircraft that are now in

 

         21     production.  There are many items installed in the

 

         22     current airframes that are not approved.

 

         23                  Processes that are not approved, examples

 

         24     are heat treatment of structural bulkheads is an

 

         25     unapproved process.  The heat treatment of the landing

 

 

 


 

 

                                        PAGE 92

 

 

 

          1     gear has been unapproved.  The welding is being done by

 

          2     uncertified welders with an unapproved process.

 

          3         Q    And did you express those concerns to John

 

          4     Dearden?

 

          5         A    Yes, I have discussed those concerns.  And prior

 

          6     to my termination at Renaissance, it was my intention to

 

          7     get all these processes approved and to certify the

 

          8     welders, but John circumvented that process, and the

 

          9     engine mount, landing gear and bulkheads were installed

 

         10     on the aircraft.

 

         11         Q    BY MR. LOWN:  If I may interject.

 

         12                  On the engine mount, landing gear and what

 

         13     was the third item?

 

         14         A    Bulkheads.

 

         15         Q    You mentioned three components, the landing

 

         16     gear, I think, the bulkheads and what else?

 

         17         A    And engine mount.

 

         18         Q    And engine mount.

 

         19                  Was the issue with those three items

 

         20     uncertified welding?

 

         21         A    Well, the issue with the engine mount is

 

         22     uncertified welding.  Both the welder itself, which his

 

         23     certification has not yet been completed, and the 

 

         24     welding process is not certified.

 

         25         Q    So, that's the landing gear?

 

 

 


 

 

                                        PAGE 93

 

 

 

          1         A    That's the engine mount.

 

          2         Q    What about the landing gear?

 

          3         A    The landing gear heat treatment process was not

 

          4     certified.

 

          5         Q    How about the bulkhead?

 

          6         A    Again, the heat treatment process was not

 

          7     certified.

 

          8         Q    Which bulkhead was that?

 

          9         A    The No. 6 bulkhead.

 

         10         Q    Does this apply to both aircraft?

 

         11         A    Yes.

 

         12         Q    How do you imagine that Renaissance was going to

 

         13     get these aircraft certified by the FAA without having

 

         14     those processes certified?

 

         15         A    Well, there should be a paper trail for all of 

 

         16     these parts.  So, I mean, it's very possible that they'll

 

         17     slip through the system.  However, I feel strongly about

 

         18     it, and I will make written recommendations to the FAA.

 

         19         Q    You think they are going to try to get this by 

 

         20     without the FAA's knowledge?

 

         21         A    I believe so, yes.

 

         22         Q    Now, you mentioned parts in these airplanes are

 

         23     uncertified.

 

         24         A    Well, they were used.

 

         25         Q    Used parts?

 

 

 


 

 

                                        PAGE 94

 

 

 

          1         A    Yeah.

 

          2         Q    Were there any parts you felt were unsafe?

 

          3         A    No, not unsafe.  I felt that it was fraudulent

 

          4     to provide a customer with used parts on a new airplane.

 

          5         Q    The fraud would be to the customer.

 

          6         A    To the customer, yes.

 

          7                  The used parts are certified parts by their

 

          8     very nature, but as far as the customer goes, he's not

 

          9     getting what he's paying for.

 

         10         Q    But the misrepresentation of these airplanes as

 

         11     new production when, in fact, they contained used parts,

 

         12     that misrepresentation would also apply to investors.

 

         13         A    Yes.

 

         14         Q    To financiers --

 

         15         A    Yes.

 

         16         Q    -- in providing financing.

 

         17         A    Yes.

 

         18         Q    As well as the customers.  In fact, to the FAA.

 

         19         A    Yes, the FAA.  You should tell the FAA that

 

         20     you're using used parts.

 

         21         Q    What did they do to these parts to make them

 

         22     appear new?

 

         23         A    They were either painted, sandblasted or they

 

         24     are inside a structure where you can't tell, you know,

 

         25     from a new part.

 

 

 


 

 

                                        PAGE 95

 

 

 

          1         Q    And, again, forgive my ignorance, Fred, but

 

          2     doesn't there have to be some procurement audit trail as

 

          3     to where the parts came from?

 

          4         A    Yes.  The internal work-order system should

 

          5     reflect a used part, but John has never acknowledged that

 

          6     he has used parts.

 

          7         Q    I think you told us earlier what you think they

 

          8     are going to do is show these as old/new stock.

 

          9         A    Right, Larsen stock.

 

         10         Q    As part of the Larsen stock.

 

         11                  So, what they're going to do is intermingle

 

         12     these used parts which they got from Larsen with new

 

         13     parts they got from Larsen and hope that nobody notices

 

         14     this.

 

         15         A    That's correct.

 

         16         Q    And how do you come to this impression?  Are

 

         17     these things that someone told you?

 

         18         A    No.  I have firsthand knowledge of that.

 

         19         Q    How did you get that firsthand knowledge?

 

         20         A    Well, I knew what I had in stock.  I had

 

         21     inventoried all of our parts at one time, several times. 

 

         22     Actually, we had done several inventories, so I was

 

         23     keenly aware of what parts were used versus new, which

 

         24     were usable and which were not usable that came from the

 

         25     original Larsen inventory.

 

 

 


 

 

                                        PAGE 96

 

 

 

          1         Q    So, you knew that those used parts were distinct

 

          2     from the new parts.

 

          3         A    Right.

 

          4         Q    And the new parts were, in many cases,

 

          5     unserviceable because of corrosion.

 

          6         A    Yes.

 

          7         Q    BY MR. COMBS:  I can't find the citation in

 

          8     here, but the foundation was criticized in John Dearden's

 

          9     testimony under direct, because we had written a letter

 

         10     to Jane Dorsey of the FAA indicating that we did not

 

         11     believe that Renaissance had as its first priority the

 

         12     safety of the consumer in the production of these

 

         13     aircraft.  And we were roundly criticized for having

 

         14     advised the FAA that that was our concern, having

 

         15     interrupted Renaissance business.

 

         16                  Is it your opinion that those concerns were

 

         17     justified?

 

         18         A    Yes, in retrospect.  Being that the managers at

 

         19     Renaissance do not have absolute authority to run their

 

         20     departments, that is a serious safety concern, because

 

         21     John basically runs everything.  John's idea of quality

 

         22     is not a totally safe product.  His idea of quality is

 

         23     something shiny that looks good to the customer.

 

         24         Q    When it's finished.

 

         25         A    When it's finished.  So, if the airplane looks

 

 

 


 

 

                                        PAGE 97

 

 

 

          1     shiny, it's a quality product.  He doesn't make the

 

          2     connection that it starts with a basic piece of paper.  

 

          3     My idea of quality is to build a part to conform to the

 

          4     drawing.  It doesn't have to be perfect, but it has to

 

          5     meet its original intent.

 

          6         Q    BY MR. LOWN:  I want to add one potential victim

 

          7     to the litany of people who are going to think these two

 

          8     airplanes are brand new.

 

          9                  Would that also include the State of

 

         10     Missouri, the various departments in the State of

 

         11     Missouri that are providing them with economic support? 

 

         12     They are going to lead them to believe these are, in

 

         13     fact, two brand new manufactured airplanes.

 

         14         A    Absolutely.  The State of Missouri has been told

 

         15     many times that we are building new aircraft from

 

         16     scratch.

 

         17         Q    And these two particular airplanes are new

 

         18     scratch airplanes.

 

         19         A    Yes.  And I believe there has been several photo

 

         20     ops, where the State of Missouri has sent photographers

 

         21     in for progress reports.

 

         22                  (Whereupon the lunch recess took place.)

 

         23         Q    BY MR. LOWN:  We're back from the lunch break.

 

         24                  Referring to the testimony in the August

 

         25     arbitration hearing, we've talked about your testimony

 

 

 


 

 

                                        PAGE 98

 

 

 

          1     and a little bit about some of the other employees'

 

          2     testimony.

 

          3                  Are you generally familiar with the

 

          4     testimony regarding their ability to produce airplanes

 

          5     and the cost of production that was given by the other

 

          6