Development Bank of American Samoa has moved to recover more than $200,000 in loan proceeds to locally based start-up Tausani Airline, which was to use the loan money to purchase two aircraft from a now bankrupt Guam firm and there was nothing in Tausani’s initial loan proposal for leasing the ASG 19-seat plane, says DBAS president Ruth Matagi-Fa’atili, in testimony before a Senate panel early this week.

However, Tausani president Filifa’atali Michael Fuiava countered that leasing of the ASG plane was in fact part of the initial loan proposal to DBAS, which failed to distribute the rest of the $400,000 after loan documents were signed just over three years ago.

Matagi-Fa’atili and Filifa’atali, who is the new Agriculture Department director, appeared Wednesday before the Senate Transportation/Port Committee, whose chairman, Sen. Paepae Iosefa Faiai called the hearing to find out the status of Tausani, which leased more than two years ago the ASG plane for Manu’a flights, as well as the status of the DBAS loan.

DBAS president explained to the committee that Tausani’s initial application sought a loan of $400,000 to purchase two planes from Guam and Tausani had to meet conditions of the loan.

“They met the requirements. So we issued the [check] disbursement,” she said, adding that it was when the board conducted a site visit of Tausani that DBAS learned that there was a change. Instead of two planes purchase from Guam, Tausani was using the ASG plane.

Funding for the total loan amount was from two programs: the federal Economic Development Revolving Loan (overseen by Department of Commerce) and a local program financed by DBAS. According to Matagi-Fa’atili the federal loan program, in which DBAS and DOC worked together, put together specific guidelines to follow on how the money is spent.

The second program is a local program, financed by DBAS, she said.

Paepae asked if DBAS made any contact with the Guam Company regarding the total cost of the two planes and the type of aircraft.

Matagi-Fa’atili said DBAS, as well DOC, had conducted a review, which also involved the bank’s attorney because there was some problems with the company, identified in the proposal. The DBAS president didn’t identify the company.

Asked by Paepae if Tausani had changed its proposal to reflect the use of the ASG plane as part of their loan proposal, the DBAS president said there was no notification in writing.

When given the chance to address the committee, Filifa’atali said the $400,000 loan was based on plans the airline had already laid out for the two planes to be purchased from Guam. He said when the loan request was approved and documents were signed, he along with Rep. Su’a Alexander Jennings (who is involved with Tausani) was told by DBAS for him or Su’a to pick up the check the following day.

However, when Su’a showed up the next day to pick up the check, he was told that the check was not ready, said Filifa’atali, who informed the committee that the loan was approved and documents were signed for $50,000, which was not sufficient to purchase even one plane. Then Tausani moved on to “plan B”  — to use the ASG plane, he said and again reiterated to the committee that the ASG plane was part of the proposal.

However, Matagi-Fa’atili insisted that the initial loan proposal was to purchase two planes, but it was when Filifa’atali later appeared before the DBAS board where the revelation was made about a change to the loan request that the ASG plane would be leased for the airline’s operation.

Senate President Gaoteote Tofau Palaie asked why the bank issued only a $50,000 check, but not the entire amount at the beginning, and Matagi-Fa’atili responded that there were a lot of conditions of the loan that the airline had to meet and thereafter the DBAS gave its approval.

“So we gave them $50,000 — not working capital — but to help them to get their stuff in order before we disbursed the full amount,” she said, but, noted DBAS then discovered that the Guam company had filed “bankruptcy” in Guam.

Asked by Gaoteote for a break down of the $250,000 payments given to Tausani, the DBAS president said $50,000 was released in December, followed later by two separate $100,000 checks.

Gaoteote said the committee hearing is not to point fingers about who is right or wrong, but the important issue to him is how DBAS is going to recover the $250,000 already given Tausani.

Matagi-Fa’atili said the bank is working with its attorney to recover the money and Tausani has made some payments.

Sen. Tuiagamoa Tavai asked about any “guarantee” made by Tausani in repaying the loan to which the DBAS president responded, that it was “personal income” of individuals in the airline as well as a quarter acre of land and a home on the land that was put up as collateral.

She also says that the bank’s attorney has informed DBAS management that there were conditions of the loan that were “not satisfied” by Tausani and this was among the reasons that the bank’s board made the final decision not to disburse the balance — $150,000 – of the loan.

DBAS board chairman Sen. Nuanuaolefeagaiga Saoluaga T. Nua was present at the hearing, and suggested that this issue be returned to DBAS management, the bank’s board and Tausani for further review and discussions on how to resolve it. This was the only time that Nuanuaolefeagaiga addressed the hearing.

Regarding the status of the Federal Aviation Administration certification, Filifa’atali says the plane is prepared for it, but recent communication from the FAA indicated that the federal agency needs the resources in order for people to come down to conduct the inspection.

However, he says the plane has been on the ground not flying for a long time and therefore, some of the inspection requirements pertaining to parts of the aircraft need to be done in preparation for the FAA inspection. That means, he said, this will be a new expense for the airline.

FAA spokesman Ian Gregor told Samoa News last month that the FAA is working to free up resources to begin the certification process for Tausani Airlines. “We expect to start the process this summer, provided that Tausani is prepared to begin that process,” Gregor said.