Financial collapse, corporate jet caused hundreds of layoffs at EIT

By Dave Greber

April 25, 2013 Updated Apr 25, 2013 at 9:18 AM EST

(WBNG Binghamton) In addition to the nationwide financial collapse of 2008, the culprit behind the elimination of hundreds of jobs at Endicott Interconnect ever since is an $11.5 million 2007 Hawker corporate jet.

Town of Union-based Endicott Interconnect is being sued in U.S. District Court, Northern New York Division by Canal Air, a subsidiary of GE Capital that owns the private jet, after it admittedly missed a monthly lease payment.

EI's former President and CEO Jay McNamara asked a federal judge earlier this month to dismiss the lawsuit. But that declaration in federal court -- which came just four days before he retired -- provides an insight into the company's health that neither McNamara nor any other company official has discussed in years.

McNamara and others have not returned repeated calls for comments regarding the company's reported job losses. They did not return a series of calls Thursday on the same subject and about McNamara's retirement, which went into effect April 12.

But McNamara's letter to the federal court says plenty.

"EIT has been involved, for months, in efforts to restructure its financing so as to produce a positive cash flow and to allow it to remain in business and to continue to employ its employees, currently numbering approximately 605," McNamara wrote in the letter dated April 8.

That's nearly 800 fewer than the 1,400 employees reported to Action News in 2010 by company officials.

EI is a private company, meaning such inter-working disclosures are rare. But it's also been boosted by tax dollars during its 10-year existence. The company has received millions of dollars from the state for job retention and creation.

Community leaders say they feel shut off as well. Officials from the town of Union and Broome County say communication from EI has been non-existent.

Lawsuit seeks $11.5M

Business was good for Endicott Interconnect in 2008 -- before the nation's financial collapse. The company's "considerable" travel needs led to a lease of a corporate jet. It then formed EI Transportation in February 2008 to shield itself when it entered into the lease.

Canal Air says Endicott Interconnect failed to make a nearly $77,000 monthly payment on the corporate jet. But the lease agreement signed by Canal and EI -- which EI now calls unfair -- stipulated damages in excess of $11.5 million, an annual interest rate of 18 percent and attorney fees.

McNamara said his company stopped making payments in October 2012. The lawsuit was filed Nov. 26.

McNamara claims in the letter "by the time the lawsuit was instituted, EI Transportation had already come current with the lease payments."

He also said EI, Canal and GE Capital had verbally agreed to a sublease agreement to help EI make its monthly payments. That deal apparently fizzled.

But bankruptcy is believed to be avoided -- for now.

The 10-year lease agreement allowed Canal to take back the jet -- which is still parked at the Greater Binghamton Regional Airport -- and collect the late payment and $11.5 million. If that happens, McNamara said it “would also likely be a bankruptcy filing for EIT, which it has managed to avoid as a result of its restructuring efforts and agreements it has reached with nearly all of its vendors."

Mum on job loss

The New York State Department of Labor requires private companies of more than 50 people to send out a public notification about significant layoffs or plant closings, meaning companies like EI are required to report sizable layoffs.

Those notices also depend on whether the job loss totals at least 33 percent of the full-time workforce or if it's a mass layoff of 250 or more full-time employees.

Other than former employees, however, there's been no comment on job elimination from EI during the past year.

The same line of communication has been applied to the state's department of labor. Officials there said Wednesday they had not received notification about any layoffs at EI, and were concerned about such drastic reductions.