Owner of defunct Virginia flight school faces prison
Agrees to tax evasion plea
Kevin C. Rychlik, owner of the Virginia flight school that abruptly closed while allegedly holding tens of thousands of dollars in student deposits, waived indictment and agreed to plead guilty to a decade of willful tax evasion.
Federal prosecutors allege, and Rychlik concedes in a plea agreement signed August 16, that he operated several businesses in Virgina and willfully withheld some or all federal taxes collected from employees during various periods over the course of a decade. Rychlik agreed to plead guilty to a federal felony punishable by up to five years in prison, along with additional fines and restitution to victims—in this case the U.S. government, to which Rychlik agreed to pay $3.4 million in unpaid taxes, in the plea agreement.
The plea agreement was the latest development in a dramatic series of events that included the abrupt closure of Rychlik's flight school at Manassas Regional Airport/Harry P. Davis Field in Virginia on August 1, and subsequent Chapter 7 bankruptcy filings on August 6 by three of the companies that Rychlik owned and operated, as well as another Chapter 7 petition filed by Rychlik personally.
The closure of Rychlik's aviation businesses (American Aviation Manassas LLC, operated prior to August 6 as American Aviation Services LLC, according to state records; and American Helicopters Inc.) left an unknown number of staff unemployed, and an unknown number of students who had paid substantial sums in advance for flight training not yet received among hundreds of creditors—an estimated 500, according to a document filed August 20 by Rychlik's attorney seeking an extension of the bankruptcy court's deadline to provide various documents missing from the original petitions.
One such student, Thida Aung, said she lost her $100,000 life savings, paid or loaned to the school in advance of her pilot training, with 3.5 hours of instruction to show for it. Others contacted AOPA with similar stories.
Joshua McCreary said that he had deposited $70,000 for a helicopter training package. He wrote, “This also was my life savings I had built up towards training for my career, and had decided to switch to helicopters approximately 1 year ago with goals of utility and aerial firefighting hopefully within a few hard years of training, instructing, time building etc.”
Christian Brielmaier might be one of the few students who was able to recover at least some of his deposit, $5,000. He argued with his bank that under Virginia’s consumer protection law, the no-refund policy was illegal if there was a failure to provide service. In his case, Rychlik had guaranteed the completion of Brielmaier's training by a certain date, but due to unresolved maintenance issues and cancellation of flight training, the deadline was missed.
Brielmaier said that Rychlik had a habit of announcing monthly sales, typically offering a 10-percent price reduction for advance purchase of training time. The last such sale was announced via email on July 27, offering a 20-percent account credit on at least $5,000 spent, just days before Rychlik declared bankruptcy. He also offered students who were leaving the area an opportunity to sell their unused deposits to other customers at a reduced price. According to an email sent to flight school customers on May 14, “A few deals are available from old customers or customers who have moved away.” In an email dated April 18: “We have some customer deals we are brokering for them, great deals and great savings, most of these are old customers that moved away and willing to give a deal.”
According to former students and various emails they provided, the offers consistently came with time pressure, as in “This weekend only” (June 14), or “Today only” (April 5). Some include appeals for sympathy: “I’m recouping from another stroke” (March 16), “Still in stroke recovery” (May 15).
Rychlik's bankruptcy attorney, seeking an extension of the August 20 deadline to file required bankruptcy documents, also cited those health concerns in filings in each of the four pending bankruptcy cases: "Mr. Rychlik has, in recent months, suffered several strokes and as a result must 'pace' himself in the workload required to complete these tasks," the August 20 motions state.
Brielmaier said Rychlik never replied to any of his letters requesting clarification on services not rendered.
The bankruptcy documents filed to date leave it unclear what assets, if any, will be available for the bankruptcy court to distribute to creditors. While the bankruptcy petitions and the felony tax evasion case are being heard in the same federal court district, they are not directly connected. Years of unpaid taxes detailed by prosecutors in court documents involve two of several companies that Rychlik owned, and one of Rychlik's two aviation-related companies. The federal government's claim to $3.4 million in unpaid taxes—payroll taxes withheld from employees but not turned over to the government—cannot be discharged under federal bankruptcy law, meaning the IRS will be first in line to claim any liquidated assets until restitution to the government is paid in full.
Not all of Rychlik's businesses were related to aviation. Documents filed by prosecutors in the criminal case specify the tax charges pertain to conduct on behalf of American Helicopters Inc., and Security Associates International, a private security business. Prosecutors noted that Rychlik owned and operated other businesses, including Fairfax Armory Inc., Gun Shop LLC, Performance Auto Center Inc., Rychlik Companies Inc., and Virginia Arms Company Inc., which was among the three businesses Rychlik owned that filed Chapter 7 petitions on August 6, along with American Aviation Manassas LLC, and American Helicopters Inc.
Rychlik is scheduled to be sentenced on the tax evasion charge January 24 at 10 a.m. in the Albert V. Bryan U.S. Courthouse in Alexandria, Virginia. Rychlik was released from federal custody subject to various conditions imposed by Judge Claude M. Hilton, including that he must remove all firearms from his residence and provide all of his financial records to the court, and that Rychlik is not allowed to open new lines of credit, loans, or bank accounts without court approval. He is also required to ask for approval from the court should he enter another employment or be self-employed.
