AFFIDAVIT UNDER OATH
May 10th, 2002
9:37 o'clock a.m.
MR. PETER C. LOWN
Certified Court Reporter
8 Acevedo, Fred
12 EXAMINATION PAGE
15 By Mr. Lown, Mr. Stone, Mr. Combs 4-123
20 No. PAGE
22 1 (General Tool Company letter.) 42
1 AFFIDAVIT OF FRED ACEVEDO
4 Taken at 9:37 o'clock a.m., May 10th, 2002, in the law
5 offices of Lown, Stone & Hilleman, 2659 East Guadalupe
8 Rules of Civil Procedure.
13 Present at the affidavit under oath were: Mr.
14 Peter C. Lown, Mr. C. Randall Stone, telephonically, and
15 Mr. P. Douglas Combs.
20 BE IT REMEMBERED that the witness does waive the
21 right to read and sign the affidavit.
2 May 10th, 2002
3 9:37 o'clock a.m.
5 MR. LOWN: Okay. Present today are C. Randall
6 Stone, who's present by speaker phone, and he is the
8 arbitration litigation; myself, Peter C. Lown, and I'm
11 president of the Don Luscombe Aviation History
12 Foundation; and also, Fred Acevedo.
14 FRED ACEVEDO
16 called as a witness herein, having been first duly sworn,
17 was examined and testified as follows:
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?
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.
Q And you've come here today to
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,
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
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
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
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
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.
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?
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
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
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
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
22 A It wasn't chromed, but had it installed.
23 Q So it can't be conformed while it's in the
25 A Not anymore, no.
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
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
1 doing. And if, you know, you have a production
2 certificate, then the company itself will certify those
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
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.
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
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.
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
5 Q So, in September, he, or Renaissance, started
6 production of these ten, as you described, detail
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
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
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
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.
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
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
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
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
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
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?
1 A Yes.
2 Q But, in December, there were not sufficient
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
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
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
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
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
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
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?
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
1 airplanes to date?
2 A I cannot tell you which airplane or -- as far as
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?
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
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
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
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
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.
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
21 Q You said a lot of Larsen's parts were
23 A Yes.
24 Q Is it your impression that those unserviceable
25 parts are clearly not going to be used?
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
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?
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
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
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
16 Q But no steps had been taken to complete that
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
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
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
25 Q What was your start date again?
1 A I started August -- I'm sorry, April first of
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
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
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.
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
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
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.
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
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
19 A No.
20 Q He didn't tell you any information about the
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
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
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
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
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
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
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
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
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
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
24 What do you think that equipment might be
25 worth? And that's separated from the dies.
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
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
23 A Well, I've read the projection from John of as
24 many as 1500 airplanes per year, and I know that is
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
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
7 Q Do you know how Univair is producing those
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
25 A Yes.
1 Q I mean, they don't exist. He's known it all
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
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?
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
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
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.
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
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
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
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
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
8 Q The state received documentation from John's
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
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?
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.
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?
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.
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
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
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
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.
1 Q Has Mr. Jeschky or Mr. Dearden said anything to
2 the employees about what they are going to do about this
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.
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
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
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?
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
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
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
24 Q BY MR. STONE: How long ago did the Czech
25 workers leave?
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
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
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
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
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
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
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
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.
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
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?
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
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.
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
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
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
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?
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
20 Q Which was?
21 MR. COMBS: Last year. It was just before the
23 THE WITNESS: Yeah. I was there for one day,
25 Q BY MR. LOWN: So, at the time of the
1 arbitration, though, they either knew that your opinion
2 was that the cost was unrealistic, or they should have
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
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
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
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.
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
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
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
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
8 A Absolutely.
9 Q So, there are no toe-brakes in the original
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
1 your leaving in January, right?
2 A Right.
3 Q Those drawings have been provided in late
5 A Okay.
6 MR. LOWN: Randall?
7 MR. STONE: I can't think of anything else on
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
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
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
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?
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
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.
1 Q Anything else concerning the information
2 presented to Missouri that you consider to be false or
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
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
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.
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,
7 Q And you just mentioned a gentleman's name. I
8 forgotten that name you said. You did not believe he was
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
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
24 Q So, how much, to your understanding, is it that
25 you're entitled to ownership at this point?
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
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
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
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
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
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
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.
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
18 A Right. And that was produced as a home-built
19 aircraft, amateur-built aircraft, and it is certified as
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
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
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
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
17 "Question: Did there come a time later in
18 the year 1999 when you were prepared to commence
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
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
7 That was, again, in Georgia in 1999. That's
8 the same stuff that they brought to Missouri a year
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?
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.
1 (Whereupon a short recess took place.)
2 Q BY MR. STONE: Fred, what is a production
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
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
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
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
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?
1 A That's the engine mount.
2 Q What about the landing gear?
3 A The landing gear heat treatment process was not
5 Q How about the bulkhead?
6 A Again, the heat treatment process was not
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
24 A Well, they were used.
25 Q Used parts?
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.
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
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.
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
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
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
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
1 and a little bit about some of the other employees'
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