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Shareholder sues Allegiant Air parent company over safety, business practices

A shareholder for Allegiant Air's parent company, Allegiant Travel Co., is suing the company and its executives. Pictured is Allegiant's headquarters in 2016. [JAMES BORCHUCK   |   Times, 2016]
A shareholder for Allegiant Air's parent company, Allegiant Travel Co., is suing the company and its executives. Pictured is Allegiant's headquarters in 2016. [JAMES BORCHUCK | Times, 2016]
Published Dec. 7, 2018

A shareholder is suing Allegiant Air's parent company and its executives over what she says is an "illicit and dangerous business model" that exposed Allegiant and people who hold stock in the airline to significant financial liability.

Filed in Nevada's Clark County court this week, shareholder Charlotte Woolery alleges that Allegiant Travel Co. CEO Maurice Gallagher Jr. pushed a business model he used at now-shuttered budget airline ValuJet. She says it "devalued safety, maintenance and training to increase the company's bottom line."

Those practices ultimately caused the value of the company to fall, she claims.

Allegiant is the predominant carrier at St. Pete-Clearwater International Airport. Spokeswoman Hilarie Gray said the company does not comment on pending litigation.

Among the problems the lawsuit cites are significant mechanical issues with Allegiant flights, as detailed in a Tampa Bay Times investigation in 2016 and a 60 Minutes investigation this year. The Times found that the airline was four times more likely than other commercial airlines to have in-air mechanical issues. CBS's 60 Minutes built on that investigation with updated findings for 2016 to 2017, which showed that Allegiant flights were three-and-a-half times more likely to have in-flight mechanical problems than its peers.

These problems, Woolery said, are a result of contracting out maintenance with "little to no oversight," which led to "chronically understaffed and undertrained" work crews.

Woolery also accuses Gallagher, executive vice president Scott Sheldon, president John Redmond and lead independent director Gary Ellmer of making $50.3 million through insider trading. She claims that between 2015 and 2018, Allegiant wrote in its filings with the Securities and Exchange Commission that it maintained Federal Aviation Administration standards for its training and maintenance though its top executives knew it did not.

"These improper statements have devastated Allegiant's credibility," the lawsuit said, causing its overall stock value to fall by $373.5 million. Its stock price topped out above $230 a share in August 2015 and was down to just more than $125 on Friday.

Combined, Woolery alleges, the practices of Allegiant executives led to a securities class action lawsuit by investors, several lawsuits brought by customers on Allegiant flights and the "wrongful termination" of an Allegiant pilot "fired after following proper safety protocol."

Woolery is asking a judge for the defendants to pay damages for the alleged insider trading and "waste of corporate assets;" for an order directing the company to revise its leadership and adhere to the law, giving shareholders the right to vote on policies such as increasing safety and maintenance protocols; and to require the defendants to give back the money they allegedly earned from insider training. It also seeks other damages and legal fees.

Allegiant directors Montie Brewer, Linda Marvin and Charles Pollard are also named as defendants in the lawsuit.

Contact Malena Carollo at mcarollo@tampabay.com or (727) 892-2249. Follow @malenacarollo.

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