in Houston, Texas

Houston Airport System's hidden international web of companies operates in secret

Thursday, Jul 09, 2009, 11:24AM CST
By Jennifer Peebles & Steve Miller

It builds airports in Ecuador and Costa Rica and has plans to build or run them in several other countries. Its operations are run through a web of companies in Houston, the British Virgin Islands and Latin America -- offshore and out of sight to taxpayers and government watchdogs. And officials of the very government it's supposed to serve say they can't get basic information about its finances.

It's the Houston Airport System and its unique program through which its employees spend hundreds of hours each month assisting airports in other nations. This program was originally billed as a way to sell to foreign airports the expertise of the seasoned pros who occupy the ranks of Houston's three airports.

But Texas Watchdog has found that this operation has grown many tentacles that include spinoffs incorporated offshore. One expert has called this intricate web of companies "quite unusual." Because of the secrecy of this web, and the fact it's linked to tens of millions of dollars in loans, officials say it's unclear how this all affects Houston taxpayers.

“I now have tremendous questions about this,” said Houston City Councilman M.J. Kahn, who asked for financial information from the nonprofit in May and was apparently ignored. “I want to see audited financial statements.”

A review of the airport system's outside work by Texas Watchdog has found:

* An intertwined network of nonprofit and for-profit companies, some based here and some based overseas, with a revolving set of key players that includes city officials.

* These companies work almost entirely in secret despite being created by, and for, a government entity and using public resources. Indeed, this web of companies -- including a nonprofit signed off on by the Houston City Council and run by city airport officials -- says its books aren't open to anyone, even the city, and it's resisting efforts to make its records public to Khan, to the city's chief financial officer and to Texas Watchdog.

* This web of companies created in the dark has become linked to tens of millions of dollars in loans by overseas banks, the federal government and the World Bank, while largely escaping public scrutiny here at home. In fact, one line of credit linked to the airport system's hidden network of companies tops out at $200 million. The city controller says the nonprofit couldn't legally put the city on the hook for those debts, but the nonprofit is refusing to release documentation about exactly how much it owes.

City Controller Annise Parker's eyebrows raised about an inch -- and her jaw dropped -- when she was told by Texas Watchdog Tuesday that the nonprofit had created spinoff firms including one in the British Virgin Islands and a for-profit firm jointly owned with a Canadian airport-management firm.

“That is so far away from anything that was pitched to us as council members,” said Parker, who was on the city council in 2001 when it signed off on the idea of the airport system creating a nonprofit to do international consulting work. The controller's office, at the suggestion of the city's independent auditing firm, recently asked the nonprofit to provide some basic financial information and got a hostile response.

(Story continues below graphic. Click here to jump down.)


This web of companies has been controlled by current and former city officials, including the man credited with creating the airport system's outside business, former city aviation director Richard Vacar, who predicts that one day, five to 10 years from now, when the airport system has numerous outside projects going, "money can come into the airport system in fairly large amounts," he said. "When those days happen, I'll be deemed a genius."

Continued on ...
Page 2: Laundry list of firms created
Page 3: Some companies based offshore
Page 4: City's auditors say nonprofit has "crossed threshold"
Page 5: Airport: Despite public employees' labor, nonprofit says it's private

Spider web photo by flickr user foxypar, used via the Creative Commons license.

Thursday, 07/09/2009 - 01:04PM

Jennifer & Steve:

Great work! You are truly earning your moniker, Texas Watchdog. I'm amazed with the "jaw dropping" reaction of Annise Parker. She's the CFO and former council member who approved (at least some of) the original structure.

Getting the financial records:

Mayor Bill White should order Eric Potts to immediately release those records. The charter of HASDC requires that the Chairman be the COH Director of Aviation. If Potts refuses to order the release he should be terminated. No question. No need for a lengthy wait on the AG's office. The Mayor, and any officials running for re-election or higher office will ignore this scandal at their peril.

Keep Digging!

R A KIng
Friday, 07/10/2009 - 03:53PM

Pretty shocking! Call in the Texas Rangers. They'll get to the bottom of this! GO WATCHDOG, GO!!!

tired dog
Sunday, 07/12/2009 - 03:23PM

Little by little we see how Vacar set up his own operations on our dime. This was a scam from the get-go, and now Richard luxuriates at his compound up near Cleveland....or perhaps he\'s off in the islands running a yet undiscovered sham company. Succeeding city hall administrations have ignored the airport system escapades except for taking bribes from prospective concessionaires. Time for heads to roll.

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