Helicopter School Closes, Leaving Students in Lurch

LAS VEGAS — A helicopter flight training school run by a prominent Republican fund-raiser in Nevada has declared bankruptcy, leaving students in 18 states responsible for hundreds of thousands of dollars in uninsured student loans.

Skip to next paragraph Enlarge This Image Isaac Brekken for The New York Times

Jerry Airola, in 2003, the chief executive officer of Silver State Helicopters, is also a Republican fund-raiser in Nevada.

Enlarge This Image Isaac Brekken for The New York Times

The flight school, Silver State Helicopters, has declared bankruptcy, closing Feb. 4. Troy Swezey, is one of many students who financed his tuition by taking out private loans arranged by Silver State. He estimates he owes 0,000.

Now lawyers for several students say they plan to file lawsuits accusing the executive, Jerry Airola, of operating the flight school, Silver State Helicopters, which is based here, as a pyramid scheme that led to the company’s closing on Feb. 4.

The closing also forced the layoffs of 750 employees at 33 locations, and the bankruptcy declaration halted a binding-arbitration proceeding meant to settle the complaints of 40 students who filed an earlier lawsuit accusing the company of fraudulent business practices. Those students, along with dozens of others across the nation, are working with lawyers in an effort to pursue refunds of at least some of the tuition of about ,000 that Silver State charged each student.

Despite having enrolled thousands of students since its founding in 1999, the company had less than ,000 in assets against million in debt, according to its bankruptcy filing.

A spokesman for Eos Partners, the New York venture capital company that paid million last August to secure a 60 percent interest in Silver State, attributed the closing to dwindling enrollment. “There weren’t enough students coming in with the funds to sustain the business,” the spokesman, Michael Freitag, said.

Mr. Freitag said a sharp downturn in the student-loan market last fall curtailed the school’s ability to secure financing for new students and caused the decline in enrollment.

The attorneys general in Oregon and California are looking into the company’s activities.

“We have an interest in protecting students in these schools,” said Gareth Lacy, a spokesman for the California attorney general. “With the school going bankrupt, we’re not sure there is anything left.”

A hearing to examine Silver State’s holdings in Federal Bankruptcy Court here, set for Monday, was canceled.

Troy Swezey, 40, a parking valet on the Strip, is one of many students who financed his tuition by taking out private loans arranged by Silver State. The program was especially attractive, Mr. Swezey said, because the loans would not start coming due for two years, theoretically giving students time to get through the 18-month program and land a job. Most flight-school programs are pay as you go; Silver State collected all the money up front.

Mr. Swezey and other students complained that the school never had enough operable aircraft or available flight instructors to allow them to complete the program within 18 months. Mr. Swezey said he enrolled in May 2006 and was far from securing his commercial pilot’s license.

“If you hire a painter to paint your house and you give him all the money, why should he quit painting your house in the middle just because he can’t get any other houses to paint?” asked Mr. Swezey, whose first loan payment is due in May. He has calculated that the 10.5 percent interest on his 20-year loan means he owes nearly 0,000.

Mr. Airola, who continued as chief executive officer and minority owner of the company after the Eos investment, did not return calls for comment. Days before the bankruptcy declaration, he was a host at a Nevada Republican Party fund-raiser here attended by President Bush.

Lawyers for the students said that what Mr. Freitag described was a classic pyramid scheme in which the company was constantly on the hunt for new capital to pay its prior commitments. They note that in 2006, Inc. magazine named it the 12th-fastest-growing private company in the United States.

“The students were afraid to speak out along the way because they didn’t want to be thrown out of the program, and they were afraid they’d lose all their money,” said Peter C. Lown, a lawyer in Jonesboro, Ga., who is representing some of the Arizona students.

Jody Pidruzny, who was a financial aid officer and an enrollment officer at the school’s headquarters here, said her fiancé completed the program in Washington State in 10 months.

“I was involved when it was a very, very small operation, and I know without a shadow of a doubt it was never intended to be a pyramid scheme,” Ms. Pidruzny said. “Our goal was to grow a commercial operation and use the flight schools to employ our graduates in commercial operations. It never got off the ground.”

Mr. Airola is not new to controversy in Las Vegas. In 2006, he spent million of his own money to run for Clark County sheriff, but he lost in a landslide when it was revealed that his claims of having been a police officer in California were false.

Nonetheless, Mr. Airola remained a figure in the state’s Republican establishment, serving on the transition team of Gov. Jim Gibbons in late 2006. Last month, the governor appointed Mr. Airola to the Nevada Economic Development Advisory Board. A spokeswoman for the Mr. Gibbons said the governor was not rethinking that.

“The governor has no plans to ask Mr. Airola to step down, nor does he plan to return any contributions,” the spokeswoman, Melissa Subbotin, said Tuesday.

Meanwhile, Mr. Swezey, who said he cast about for a career for eight years after serving in the Army as a Black Hawk helicopter engineer, is despondent.

“The one thing I missed most about the military was being in the air,” he said. “I really wanted this career. I don’t know what I’ll do now.”

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