March 23, 2009 -- Embattled bank JPMorgan Chase, the recipient of $25 billion in TARP funds, is going ahead with a $138 million plan to buy two new luxury corporate jets and build "the premier corporate aircraft hangar on the eastern seaboard" to house them, ABC News has learned.
The financial giant's upgrade includes nearly $120 million for two Gulfstream 650 planes and $18 million for a lavish renovation of a hangar at the Westchester Airport outside New York City.
A public hearing will be held by Westchester County officials tonight regarding JPMorgan's request for new hangar space.
According to JPMorgan Chase architects, the new hangar will be built with reclaimed wood, quarry tile and even a "vegetated roof garden."
The Gulfstream 650's are described by the manufacturer as the "fastest," "widest" and "most comfortable" private jet ever with superior cabin amenities, an optional stateroom, and 12 interior designs to choose from.
"It's a remarkably boneheaded decision," said corporate watchdog Nell Minow, the editor and founder of The Corporate Library, a group that provides independent corporate governance research and analysis. "It's completely tone deaf."
Mike Dolphin, president of fixed-based operator Avitat Westchester, is fighting the bank's grand plans – because he says JPMorgan's proposed expansion would force his company out of the hangar the bank is eyeing. Westchester County, NY has recommended that the bank – a "high quality corporate citizen" – be awarded the lease to the hangar when it becomes available in April 2010, in part, because of how much money it is dedicating for the "construction of a state of the art "green building.""
"I am the little guy, so we have a bit of a David versus Goliath fight on our hands," Dolphin told ABC News. He said JPMorgan Chase's plans come at the "wrong place, wrong time" and that despite scaled back private aviation from other TARP-funded companies, JPMorgan Chase is going ahead with its plans, which, if finalized by the county, will cut his business and his staff in half.
"You wouldn't find another hangar in the airport that has anything near this," Dolphin said of the bank's proposal.
JPMorgan Says No TARP Money Will Be Used
Joseph Evangelisti, a spokesman for JPMorgan Chase, said no TARP money would be used to make any payments for new jets or jet hangar improvements. He refused to comment on whether JPMorgan had put a down payment for new planes, saying only that any future jet purchases would be part of its normal aircraft replacement policy, and that JPMorgan Chase will repay all TARP money before it makes any payments for new planes or renovations.
The spokesman also said the bank would have nine years to make its $18 million in renovations, but the county told ABC News that JPMorgan Chase's plans indicate that renovations would be complete within six months of assuming the lease.
JPMorgan Chase currently has four jets at Westchester Airport, two of which would be replaced by the 650's when they arrive in 2013, Dolphin said.
Corporate Perks Take a Hit
TARP-funded corporations have been harshly criticized recently for continued use of luxury perks and corporate waste. President Obama has voiced his outrage, introducing regulations on executive compensation and on the disclosure of money spent on such perks. After pressure from his administration, Citigroup abandoned plans for a new $50 million corporate jet from France. And in February, Obama said the days of bank executives flying corporate jets "were over."
But on March 11, the chairman of JPMorgan Chase, Jamie Dimon, said he could not understand why corporate America has such a bad image.
"When I hear the constant vilification of corporate America I personally don't understand it," Dimon said.
Dimon, whose 2008 compensation package, according to SEC documents, was worth more than $19 million in salary, stock and options, declined to speak with ABC News about the proposed plans.
"There are going to be business school case studies for generations about exactly these decisions, and people will be learning forever about what incredible stupidity these executives showed," said Minow.
Avitat Fights Back
Dolphin said his company approached the county in 2007 to renew the lease for a 30-year term. But, he said, the county uncharacteristically decided to look elsewhere for another tenant and put out a Request for Proposals. Avitat Westchester has filed a federal lawsuit against the county, saying its decision goes against past practices and violates their First and Fourteenth Amendment rights. Dolphin believes the county is retaliating against them after previous disagreements between the company and the county.
Westchester County Officials tell ABC News they're in favor of going forward with the JPMorgan proposal because it "is the best deal for county taxpayers and the best deal for the environment." They say that if the Board of Legislators approves the new lease, the county "will be happy to discuss with any company that may be displaced from the current hangar other alternatives for them."