Latest News 2008 October Airline Files for Ch. 11 Bankruptcy in Wake of CEO Fraud Scheme

Airline Files for Ch. 11 Bankruptcy in Wake of CEO Fraud Scheme

Sun Country Airlines has filed for bankruptcy under Chapter 11 just days after the founder of Sun Country's parent company, Petters Group Worldwide, was charged with felony fraud. Despite filing for bankruptcy, Sun Country plans to continue operations as usual and does not anticipate any scheduling disruptions.

As a result of Chairman and CEO Tom Petters' involvement in the multimillion dollar fraud scheme, Sun Country could not turn to its parent company for a short-term loan when it began to experience cash flow shortages. Sun Country planned to use the loan to get through the slow autumn period and into the winter season when travel is heavier.

"We were forced to take this action as a result of recent events at Petters Group Worldwide," said Sun Country CEO Stan Gadek in a prepared statement.

Last week Gadek warned Sun Country's 858 employees that they could face layoffs or even a complete shut-down by December 1. However, this warning was issued to comply with legal requirements; the company does not have actual plans laid out to shut-down operations or layoff employees. Gadek did say that employees' pay will be temporarily cut by half, but that all employees will be reimbursed at the beginning of next year.

Sun Country is the second largest airline servicing Minneapolis, and flies to 10 cities year-round, including Cancun, Las Vegas, Los Angeles, Orlando, and New York. On a seasonal basis, the airline flies to such cities as Anchorage, Mazatlan, and Puerto Vallarta.

Chapter 11 bankruptcy provides Sun Country with protection from creditors while it reorganizes its finances. It's still not known what long-term effects the bankruptcy filing will have on the airline and its fleet of Boeing 737s, or on the airline's holdings at Minneapolis-St. Paul International Airport.

Petters Group Worldwide owner Thomas Petters faces federal fraud charges for mail fraud, wire fraud, money laundering, and obstruction of justice. Authorities say Petters' fraud schemes have been defrauding investors out of hundreds of millions of dollars for years. Petters recently resigned from his position as chairman and chief executive of the company.

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