Out of Lexington, Ky., (h/t to Erin Lamos) comes the jaw-dropping news, reported over the past six weeks in the Lexington Herald-Leader, of the Blue Grass Airport director’s wildly excessive and inappropriate spending — and the lack of oversight that allowed him to get away with it for two years.
On November 23, Jennifer Hewlett reported that Michael Gobb, the airport’s executive director since 1998, racked up $200,000 in travel and expenses between 2006 and 2008. The airport, a “component” of the Lexington-Fayette County consolidated government, paid $13,000 for a twelve-day trip to St. Petersburg for a conference,$8,100 for a conference in Croatia, $5,500 for a conference in San Diego (“Gobb spent $834 at Island Hoppers, a store that sells resort wear. He later reimbursed the airport $313.”), and $3,800 for a conference in Washington, D.C. According to the airport, Gobb networked at these conferences in an effort to bring new air service to Lexington. But according to the paper:
Airlines that have come to the airport during Gobb’s tenure include ATA Connection, TWA, American Eagle and Allegiant Air, according to Lovely. (The first two have since left. ATA went out of business, and TWA was bought by American Airlines.) . . . According to FAA figures, the number of passengers boarding planes nationally increased by 13 percent from fiscal years 1999 through 2007, while the number boarding at Blue Grass was down 1 percent for calendar years 1999 to 2007.
Subsequent articles followed, detailing a chain of absurd expenses (in addition to Gobb’s company car and gas, pricey cell phone service, and numerous club memberships on top of his $219,450 salary):
- “Tens of thousands of dollars” spent on gifts, ostensibly airport clients, including $6,500 worth of bourbon and other liquor and “$6,000 . . . spent during the same period at toy stores . . . to keep airport employees and vendors, not clients, happy.”
- “Gobb travels business or first class internationally because of back problems.”
- A $26,000 conference trip to Hawaii for Gobb, airport chairman Bernard Lovely, and three other airport officials.
- A $4,500 Texas strip club excursion in 2003 ostensibly for entertaining American Airlines executives. (“No American Airlines executives attended the strip club outing.”)
As the scandal mounted, the state auditor was called in to review the airport’s expenses, then Gobb was suspended before he resigned. Now the county council, which oversees the airport board, has asked Bernard Lovely to step down as airport board chairman. In developments reported today, the state auditor has put law enforcement on notice of “possible criminal wrongdoing” at the airport.
How did Blue Grass Airport run so far off the rails? First, there was clearly poor accountability. The only person overseeing Gobb’s spending was Lovely himself. The rest of the airport board did not pay attention, according to a former board member: “I know at one time the board felt that there might have been some excessive spending, and Mike was talked to by the chairman. It was my understanding that everything was worked out, and it was no problem.” But no follow-up? “‘We do not go over these charges on the credit cards,’ said David Stevens, an airport board member and an Urban County Council member. ‘That’s kind of between the chairman of the board and the CEO.’”
There were several other top officials with airport credit cards, and it has also come to light that Gobb, who oversaw his deputies expenses, had his deputies make purchases on their cards, which would thus be hidden from the board chairman’s oversight.
Chairman Lovely’s obtuse response to the newspaper’s inquiry did not help. “What I’m telling you is all those expenses go to the benefit of this airport,” he said at first. “”We are satisfied with Mike’s performance, more than satisfied; we are extremely satisfied.” The airport initially also defended Gobb’s salary, perks, and travel, but the Herald-Leader reports that no airport chief executive in Lexington’s peer group of airports enjoys such generous compensation.
Accountability failed up and down the local political system. The airport board, which is appointed by the mayor, failed to exercise proper oversight of the airport managers. They failed to ask, “What will a trip to St. Petersburg do for our airport? Will it bring in air service?” From what I understand, airlines don’t need swag to decide to serve a community. They want to make sure the local traffic and yield fundamentals are solid, and what they need more than a night out on the town or a personalized bottle of bourbon are incentives that can enable new or expanded service to succeed. Of course, a lot of these expenses were clearly being used for personal gain or for the airport itself, which means that the board should have been able to catch the unwarranted expenditures more easily.
It would be worth discovering how desperate for more air service Lexington’s leaders were. “We encouraged him (Gobb) to raise the airport’s profile by taking active roles in industry associations and by traveling outside of Lexington to personally deliver our message to airlines and others in a position to enhance air service,” the airport said in a statement. Small communities can get air service envy, and even though Lexington is probably supporting all the air service its market demands at the moment, local boosters often desire the prestige that is thought to come with more air service. If a talented airport manager tells you that a few trips to exotic locales to hobnob with airline movers and shakers is what’s needed, a board might think it’s worth the cost.
What are the lessons of Lexington for airports across the country? First, Gobb didn’t go to these conferences alone. Lots of other airport managers enjoy these kind of junkets. Airport boards will need to begin due diligence on their executives’ expenses lest the public do it for them, with Lexington-style political fallout. Like Blue Grass, most airports in the United States are publicly owned and operated, and their managers thus have a special role in serving the public good, which includes being good stewards of resources. A privately owned airport would have no such constraints beyond its fiduciary duty to shareholders, and if the shareholders of a private airport were to determine that Lexington-style spending was uncalled for, management would be properly disciplined. In fact, it might be a good thought exercise for public-sector airport managers: would shareholders in a private firm approve of this expense? Substitute “taxpayers” for “shareholders” and you’ve got a recipe for managing with integrity.
Kudos to the newsroom at the Herald-Leader for some excellent public-service reporting.
Blue Grass Airport’s Runaway Spending [Lexington Herald-Leader]