Jason Scales (30) has been accused of providing documents that fraudulently claimed the Isle of Man government was underwriting a loan to support the acquisition of Stobart Air, which at the time was part of the stock market-listed UK group Esken.
He has denied the charges, which include one count of fraud and two counts of supplying an article for use in a fraud.
Mr Scales has been accused of using two forged documents in his efforts to buy Stobart Air. The documents purported to show that the Isle of Man government was prepared to underwrite a £13m (€15m) loan that would be used to acquire Stobart Air.
It has emerged in court proceedings in the Isle of Man that Aer Lingus learned of the potential fraud via a text message that questioned if the island’s government had any role in the proposed purchase of Stobart Air, according to a report of court proceedings in Isle of Man Today.
In 2020, as the Covid pandemic ravaged the world’s airline industry, Stobart Air went into a tailspin, burning through millions of euro in cash. Esken put the business up for sale that year and committed to having sold it by February 2021.
The proposed acquisition was first pitched by Mr Scales in April 2021, using a virtual airline he had established just the year before, called Ettyl. He had no experience in the travel sector and at the time headed a shared office centre called The Hubb, in the Isle of Man.
At the time, Mr Scales was prepared to inject as much as €25m into Stobart Air to keep it flying, but the source of the finance to complete the deal was uncertain.
In November 2020, Conor McCarthy’s Emerald Airlines was also named the preferred bidder by Aer Lingus to operate the Aer Lingus Regional service when Stobart Air’s contract expired.
That meant Stobart Air wouldn’t have what was effectively at the time its only source of revenue.
But in April 2021, Esken announced that it had agreed to sell Stobart Air to Mr Scales’ Ettyl for a nominal £2.
A contingent consideration of £7.5m would also be payable if certain trigger events occurred at any point up to July 2024. Ettyl was also poised to buy Esken’s Carlisle Airport for £15m as part of the agreement.
But by May that year, the deal had unravelled.
“Esken has become aware that Ettyl’s proposed financing for the transaction is no longer available and understands that Ettyl is progressing discussions with another potential financing source,” said Esken at the time.
“Esken is investigating these matters and seeking further information, including with regard to the impact this may have on the ability of Ettyl to finance the transaction,” it added.
Stobart Air, which employed close to 500 people, collapsed in June that year.
“In the absence of any alternative purchasers or sources of funding for the Stobart Air business within the required timescale, Esken has advised the board of Stobart Air that it will not continue to provide financial support to the business going forward,” said Esken in a statement as it decided to pull down the shutters on Stobart Air.
Mr Scales was then exposed, according to prosecutor James Robinson.
“The lies of the defendant then came to light and he was arrested and sought to lay the blame at the feet of others involved in the failed transaction,” Mr Robinson told the court this week.
A former non-executive director of Stobart Air, Jonathan Brown, who was also a legal adviser to Esken, told the jury in the Isle of Man proceedings this week that it came as “bolt out of the blue” when it transpired that documentation provided by Mr Scales in 2021 might not be genuine.
Mr Brown told the court that at first he believed it was a misunderstanding, according to Isle of Man Today.
A number of former Isle of Man officials will continue to give evidence in the case. The defence is due to begin its arguments tomorrow.
