CHICAGO (AP) — The agency that oversees public
transportation in Chicago is suing American Airlines for falsely
claiming to buy "vast amounts of jet fuel" from a small office in a
rural community to avoid paying tens of millions of dollars in taxes in
the nation’s third-largest city, where the actual work is done.
The
lawsuit comes a year after the same agency — the Regional
Transportation Authority — accused United Airlines in a lawsuit of doing
the same thing in the same small town. The RTA filed its lawsuit in
Cook County Circuit Court late Tuesday afternoon.
The RTA oversees
the Chicago Transit Authority, the region’s Metra commuter line and the
Pace suburban bus service. The agency has been making the allegations
against American for more than a year but said it was waiting for the
airline to emerge from bankruptcy protection, something that happened in
December.
As it said when it sued United, the RTA said American
or its subsidiary, American Aviation Supply, could not possibly conduct
the business of buying fuel for jets at one of the largest airports in
the world, Chicago’s O’Hare International Airport, out of an office
that’s less than a 1,000 square feet where one or two employees work.
The office is in City Hall in the town of Sycamore.
"We’re saying
whatever work is being done there is a sham," Jordan Matyas, the RTA’s
chief of staff, said ahead of the lawsuit being filed.
Matyas said
that while the lawsuit also names American Aviation Supply, American
Airlines is responsible for what is being done — or not being done — in
Sycamore.
"This is clearly American Airlines doing the deal," he
said. "They set up a subsidiary in order to funnel the money and not pay
the appropriate taxes."
RTA alleges that under the arrangement
between Sycamore and American, the city reimburses the airline for a
portion of the sales tax it pays on the fuel. According to the RTA, the
Sycamore office cost the Chicago, Cook County and RTA a total of more
than $23 million last year.
American Airlines spokeswoman Mary
Frances Fagan said in an emailed statement that the company believes it
is "still paying the proper" tax amount and that it’s "in compliance"
with the law.
Sycamore’s city manager declined to comment.
The
litigation is part of a barrage of lawsuits filed by the RTA, the city
of Chicago and Cook County against communities outside Cook County that
allege those communities’ tax incentive programs are costing other
government agencies millions of dollars.
Matyas said he believes
an Illinois Supreme Court ruling in November strengthens the RTA’s
lawsuits. The court found in a case involving a fuel oil retailer that
sales taxes must be paid by companies in communities where most of their
business is conducted.
"The major point was these sham offices do
not work and you’ve got to pay taxes … where you are actually
conducting the business of selling."
Cook County Commissioner
Larry Suffredin agreed, saying he hopes the ruling will persuade
companies that have such offices to reconsider because, while the court
decided that the companies should not be forced to pay Cook County for
taxes they avoided before the ruling, it was clear in warning them that
they will be on the hook for those taxes from now on.
"I think they’re going to be nervous, absolutely because the court was saying … don’t do it
again," he said.
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