In April 2005, Linda Grant Williams, a structured finance and real estate lawyer living in Bedford, New York, came up with a new way to finance the construction of airport terminals. Her way of financing and refinancing these deals could have saved airlines billions of dollars, she claims in a lawsuit filed in 2008.
The idea was to issue bonds with ratings based on the demand for passengers that fly in and out of busy U.S. airports like La Guardia, JFK or LAX. High and reliable flyer traffic would translate into top bond ratings and thus lower interest rates for the terminal bonds based on that passenger stream. This method contrasts with how airport bonds are issued now, based on the considerably lower credit ratings of the individual airlines that use the terminals.
Williams had used a similar idea in 1998 to finance sports stadiums. In 2005, while she was a partner at Pillsbury Winthrop Shaw Pittman, LLP, in Manhattan, the law firm devoted over a million dollars of its own time to vet her idea from a legal standpoint and also file a patent application on it, she maintains in her suit.
According to her lawsuit, that same year Williams and some of her Pillsbury partners met with major rating agencies like Standard & Poor's and Moody's. They also approached bankers at Citigroup--which devotes a chunk of its business to financing airport terminals--along with municipal finance experts at JP Morgan Securities and Goldman Sachs. Initially, they all expressed interest for her plan, recognizing that it would save the airline industry billions of dollars, she maintains in her suit.
But then, she claims, some strange things began happening.
A few weeks after meeting with Williams, Citigroup backed out, despite the fact that they were initially gung ho. In March, 2006, her law firm asked her to resign, although it did let her retain her patent, she claims in her suit.
Williams joined another law firm, Greenberg Traurig, a few months later. That company also thought her idea was worth pursuing, she maintains. She met with JP Morgan and Goldman Sachs, who initially loved the idea. But once again, something happened. A year after she joined Greenberg, the law firm refused to renew her contract. The banks would not return her call.
Williams was confused. Why did people keep backing out, and later ostracizing her, when everyone knew she was going to save the airline industry billions of dollars? And then she realized: The banks didn't want to save the airlines any money, because they would lose billions of dollars from secondary trading and derivative products tied to the traditional way of financing airport terminals.
"When Linda tried to pitch it there was a real internal conflict, there's no doubt about it," said John Greenlee, a financial advisor in San Francisco who brought Williams in to pitch her idea to Citigroup, and is familiar with the case. "They liked it at first--the rating agencies even approved it. But then they realized if they did it it would impact their bottom line."
In October, 2008, Williams filed suit against Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs & Co. for an as yet undetermined amount of money. (In October, 2012, she filed a separate suit against Barclays' Capital.)