Fate of Mesa CFO Is Up in the Air

Lawsuits that allege destruction of evidence and a breach of confidentiality leave the airline finance chief temporarily relieved of duty.
Stephen TaubSeptember 24, 2007

Mesa Air Group placed Chief Financial Officer George Murnane III on administrative leave while it investigates issues raised about his conduct during the company’s ongoing litigation with Hawaiian Airlines. Specifically, Hawaiian Airlines has accused Murnane of destroying evidence that may show that Mesa Air misused confidential information to launch its inter-island carrier, reported the Associated Press.

The administrative leave will be for up to 90 days, pending the company’s completion of its review, according to a press statement. The Phoenix-based airline said that it launched the review after it received reports from individuals outside of the company of potential misconduct. The company did not provide further details about the nature of the misdeeds. But, said that misconduct does not involve the financial controls, financial statements, or operations of the company, according to a press statement.

“Peter has served Mesa and its shareholders well for many years,” said Mesa Chairman and CEO, Jonathan Ornstein, in a statement. “While it would be inappropriate to discuss the specific nature of this matter while an internal review is ongoing, we are able to confirm to shareholders that the conduct being investigated does not involve the financial operations or performance of the company.” Ornstein emphasized that the company will report the outcome of the internal probe as soon as the investigation is completed.

In addition, Mesa Air said William Hoke, vice president of finance, will continue to be responsible for the financial and accounting functions of the company and will perform Murnane’s duties until the review is completed.

In February 2006, Hawaiian Airlines filed a lawsuit against Mesa Air alleging that the Phoenix-based carrier violated a confidentiality agreement by using sensitive information to launch its own low-cost carrier in Hawaii. When Hawaiian Airlines was in bankruptcy in 2004, Mesa was considering making an investment in the carrier and was given access to proprietary information.

However, Mesa Air did not make an investment in Hawaiian Airlines, which emerged from bankruptcy in 2005 with financial help from a group comprising more than one dozen hedge funds.

In late August, Hawaiian Airlines filed a subsequent lawsuit alleging that Murname deleted files on three computers that contained Hawaiian’s business plan and other information, reported the Associated Press. Hawaiian Airlines further alleged that, “Mesa – specifically, Mr. Murnane himself – engaged in willful and deliberate spoliation of evidence that existed on three of his computers. He did so even though Mesa’s in-house counsel explicitly instructed him and others at Mesa to ‘preserve any and all documents,’” noted the AP

Mesa Air and Murnane did not immediately return calls made by CFO.com seeking additional comment.

In its lawsuit, Hawaiian cited a recently discovered e-mail from Murnane in which he allegedly sought advice on how to delete files, added the wire service. Hawaiian Airlines also reportedly charged that shortly after Hawaiian Airlines filed its lawsuit against Mesa Air in 2006, Murnane’s computer had their files wiped clean.

The suit against Mesa Air is scheduled to go to trial on Tuesday in Honolulu.

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