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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Vintage planes at Historic Flight Foundation in Spokane being sold to satisfy judgment

Last week, the Impatient Virgin was listed for sale on Facebook Market place for $3.75 million.

The listing might have been shocking to many casually perusing the site, not because of the 1943 North American P-51B Mustang’s randy name, but because the rare plane is part of the Historic Flight Foundation’s collection.

The foundation, located at a newly built hangar at Felts Field, is temporarily closed amid a slew of legal battles tied to a failed North Dakota business venture by the foundation’s founder John Sessions.

Last year a jury in Williston, North Dakota, found Sessions and one of his companies, Eagle Crest Apartments, had fraudulently transferred funds to other businesses he owns, including the foundation. Eagle Crest defaulted on its loan held by the Kansas City-based UMB Bank to build the apartments. The bank was awarded $20.1 million in March 2022.

Due to the fraudulent transfers, the bank was able to collect from other companies owned by Sessions, according to the North Dakota judgment. Sessions appealed to the North Dakota Supreme Court but lost.

Now, a receiver hired by the bank and approved by a King County judge has taken over the companies named in the judgment and is starting to sell off the historic airplanes.

A pending motion to dismiss the judgment in Spokane County is Sessions’ and the foundation’s last hope to prevent the sale of the historic planes.

Sessions, born and raised in Spokane and a 1971 graduate of Shadle Park High School, relocated his flight museum from Paine Field in Snohomish County to Spokane in 2019.

Development Drama

The problems are rooted in an ill-timed business venture. Sessions and a business partner saw the oil boom in North Dakota and decided to be part of the housing solution.

Sessions, who was a corporate lawyer working for Boeing before becoming an entrepreneur, said he was excited by the 168-unit apartment complex project.

The building of Eagle Crest Apartments in Williston quickly got underway but by the time the project was finished 18 months later in 2014 oil prices tanked and people were leaving the area.

That’s when Sessions said he went to Wells Fargo, their financer at the time, and told them Eagle Crest couldn’t pay its bills.

“I told them it wasn’t going to work,” Sessions said.

Sessions said the bank encouraged them to keep going with the project despite not being able to pay back their loan. He continued to manage the apartment building, paying his other companies for the work, Sessions said.

All that changed when UMB Bank took over the loan in 2019.

A jury found that Sessions was the sole person behind Eagle Crest Apartments and a handful of other companies that operated as limited liability corporations, including Bakken Housing Company, Historic Hangars, FWF, Orkney Air, and the nonprofit Historic Flight Foundation.

That finding allowed the bank to collect damages from the family of companies to satisfy the more than $20 million judgment that found Sessions fraudulently transferred money from from the Eagle Crest project to his other businesses that improperly delayed repayment to the bank.

Sessions insists that nothing fraudulent happened.

“What we did, we thought was right,” Sessions said.

While the bank is now owed more than $20 million, the flight foundation was found to have received about $300,000 from the housing project.

Sessions said only one accidental transfer was made to the foundation and that it was immediately reversed when discovered. He appealed the judgment to the North Dakota Supreme Court to no avail.

In May 2022, the North Dakota judgment was entered in Spokane County Superior Court, a standard procedure when collecting funds based on another state’s ruling. Four months later Sessions entered into a receivership in King County.

That receiver was “authorized to engage accountants, appraisers, auctioneers, or other professionals” to determine the value of the companies and sell assets to satisfy the judgment, according to court documents.

That first receiver allowed the foundation to keep operating normally, Sessions said.

But in February a different receiver was appointed to the case. According to court filings and statements from Sessions, the new receiver began to quickly evaluate and liquidate assets.

Sessions said he has “contested everything” in the receivership.

Court records show he stipulated or agreed to enter into the receivership on behalf of all companies listed in judgment.

Sessions said there had been discussions of a settlement or mediation, which he hoped would allow the flight foundation to continue undisturbed.

“None of those initiatives resulted in a serious discussion,” Sessions said.

In June, Sessions stipulated to a list of deadlines with the receiver for things like inventory lists, usernames and passwords to bank accounts, websites and social media, along with lists of all museum members, pilots and mechanics.

He also agreed to a standing Monday call with the receiver and to provide information about already scheduled events at the museum, according to court records.

While tensions were already a bit high, Sessions and the receiver had been able to come to a detailed agreement.

Rough Landing changes tone

On July 7, Sessions crashed his World War II vintage Spitfire while landing at the Deer Park airport.

“When you do what I do with the old warbirds, you have a certain amount of risk every time you fly,” Sessions told The Spokesman-Review shortly after the crash.

The receiver, however, called the risk unacceptable and noted that Sessions was “under an explicit directive” not to fly the planes, according to court documents.

Sessions disagrees, and said the flight was part of maintaining certification for the plane, which was set to fly in an air show. He did not inform the receiver of that specific flight because he didn’t think he had to.

“I put them on notice that we had to exercise the airplanes and complete inspections,” he said.

While Sessions escaped the crash unscathed, the $4 million plane was damaged.

From the receiver’s perspective, Sessions blatantly flouted the rules. The receiver pursued an injunction to prevent further damage to the planes.

Knowing the injunction was coming, Sessions filed a motion on July 20 in Spokane County Superior Court to set aside the entire North Dakota judgment on the premise that the Washington State Attorney General’s office should have been notified that a charitable organization – the Historical Flight Foundation – was involved.

“In sum, without even addressing HFF’s nonprofit status, the North Dakota Supreme Court ultimately assumed, without explanation, that a Washington nonprofit can be liable for the independent business activities of one of its directors acting in another state – apparently based on one bank transfer,” the motion reads.

The attorney general’s office did not respond to a request for comment on the Sessions case.

Larry Krauter, CEO of Spokane International Airport, filed a letter into the court record supporting Sessions and the flight foundation. He declined to answer questions about the case citing pending litigation.

The court-appointed receiver filed a police report regarding theft of property on July 24, about two weeks after the Spitfire crash, according to court records.

On July 25, Sessions agreed to an injunction that prevents him from flying any of the planes or being involved in the operation of the foundation.

The locks at the foundation have been changed and Sessions is prohibited from going within 50 feet of the Felts Field facility without permission from the receiver.

A day after Sessions agreed to the injunction, Sessions opened the foundation to the public when he wasn’t supposed to, the receiver alleged in an August report to the court.

Sessions has a “penchant for ignoring the directives,” the receiver wrote.

On Aug. 3, Sessions held a meeting in another area of Felts Field to reassure those who remain involved with the foundation.

Sessions told those people gathered that he had signed over his assets in North Dakota “but that was not enough.”

He acknowledged that crashing the Spitfire led to his removal from the foundation.

“It’s serious stuff,” he said. “Very serious stuff.”

Sessions said the attorney general’s office is coming to the foundation’s aid and that there’s a good chance the entire judgment will be thrown out.

“This is why I think rumors can be killers and the message tonight is just stay tuned,” Sessions said. “We have the best talent available doing a great job and the other side is very concerned.”

He noted most of his own money is organized into trusts and wasn’t affected by the judgment before joking about the Fairey Gannet, a rare plane he had recently purchased.

On Aug. 18, the King County judge approved the sale of planes in the Historic Flight Foundation collection. Some are owned directly by the foundation and others are owned by one of Sessions’ companies but considered to be part of the historic collection.

The first plane up for sale is “Grumpy” a B-25D Mitchell, for which the receiver already found a buyer.

With the sale approved, Sessions has asked the court to hear his motion as soon as possible in hopes of winning and voiding the sale.

“Time is of the essence,” he wrote in court documents. “In light of the aggressive liquidation efforts targeting historic aircraft and strict limitations on HFF’s operations, every day that passes presents a threat to HFF’s ability to return to normal, charitable operations.”

The bank disagreed, noting that Sessions agreed to the receivership in King County on behalf of the foundation without raising the issue of notifying the attorney general.

The law that Sessions’ is now trying to use regarding notifying the attorney general’s office wasn’t in effect in 2020 when the litigation began, the bank noted. And, the bank argued, the North Dakota court found that the foundation ignored its nonprofit legal status and was instead controlled by Sessions.

These types of arguments should be made in North Dakota not in Spokane, the bank said in court filings.

“That’s the part of it that I feel is overreaching,” Sessions said of pulling the foundation into judgment. “I understand my responsibility to step up as to the underlying claim as to North Dakota assets.”

Sessions admits he and the receiver are at an “impasse,” but thinks there’s a good chance the entire judgment is thrown out by a Spokane judge later this month.

When it comes to planning for the future it’s just a game of wait and see, said foundation board member Todd Mielke, a former Spokane County commissioner.

“I think at this point we’re all waiting for what happens at the hearing.”

This story has been updated to reflect the correct job title of Larry Krauter as CEO of Spokane International Airport and that UMB Bank is based in Kansas City.