By Alexis Muellner

Tampa Bay Business Journal

Updated: 8:00 p.m. ET Aug. 28, 2005

It`s been a bankruptcy without a flight plan.

Skyway Communications Holdings Corp., a development stage company that lost nearly $40 million from its ascent in 2002 to its last annual report filed in January 2005, hasn`t operated since late April.

But the tailspin of Clearwater-based Skyway, and its entities, has left a trail of tangled litigation and angry investors, including 24 Kuwaiti and Saudi nationals and a group of 90 shareholders in Kentucky that say they sunk retirement savings and college funds into a company that promised to protect airplanes from terrorism and provide high-speed Internet at 30,000 feet.

Now in the courts, the case has taken its share of unusual twists. Among them:

The bankruptcy lawyer for the Clearwater debtor, David Steen, took a Humvee as a retainer and then weeks later withdrew, returning the Humvee.

Key witnesses have been no-shows at depositions, prompting plaintiffs to cry contempt a dozen times.

The bankruptcy`s largest creditor says he`s out $14 million or more, is asking the judge to toss the Chapter 11 case on the grounds that the debtor has nothing to reorganize and until Monday hadn`t filed key financial documents a reorganization requires.

The lawyer for that creditor, the Solomon Tropp Law Group in Tampa, which had been representing Arkansas securities dealer Nazar Talib and his Middle Eastern investors, also unexpectedly withdrew citing ``irreconcilable differences.``

A protracted discovery battle has ensued concerning production of corporate documentation, filings show.

But evidence shows that the defendants ``have never willfully failed or refused to produce corporate documents,`` said the debtor`s counsel Murray B. Silverstein. ``Contrary to what the plaintiff thought, they found all the property. It`s all been relocated to a discreet locale in the [Clearwater] building,`` he said.

Judge uncomfortable

In the latest bankruptcy hearing on whether to dismiss the bankruptcy case, federal Judge Paul M. Glenn said the case is murky.

``I have a great deal of concern about this case,`` Glenn said.

``There`s a great deal we don`t know,`` he said. ``Substantial allegations have been made.``

At the center of the disputes are Skyway`s former president, Brent C. Kovar, his mother, Joy Kovar, and the company`s CEO, James S. Kent.

With its first lawyer out, Tampa law firm Hill Ward & Henderson is now representing the Kovars in the bankruptcy case. Lawyer Michael Brundage told the judge his firm accepted a $40,000 retainer from Brent C. Kovar`s father, Glenn Kovar, and his firm Skyway Global, once parent of Skyway Communications. Brundage said despite delays, the debtor should be allowed to reorganize.

``We have value,`` Brundage told the court.

Declared patent rights are worth $1 million, he said.

There are no secured creditors, but there are a fleet of Hummers, interest in airplanes and equipment including video screens and computers, he said. Further, he referenced possible ``strategic alliances`` or mergers in play that could be ``designed to maximize the assets.``

Statements of financial reports filed Monday included two planes, a 1989 Cessna 172 valued at $150,000 and two 1966 MD-DC-9s valued at $5 million.

Personal property assets are listed at $31.61 million, and liabilities are listed at $21.12 million.

But Foley & Lardner lawyer Mark J. Wolfson, now representing the Talib partners, told the judge ``an objective view would say, wait, they`ve been shut down for three months. They couldn`t find the money to pay a retainer and have $14 million of my client`s money in Hummers and assets,`` he said. ``Our view is it`s an abuse of the process.``

The courts need to be careful not to allow parties ``to manipulate the judicial process to seek relief,`` Wolfson told the court.

The judge set another hearing to hear evidence on the motion to dismiss the bankruptcy.

The million-dollar algorithm

Skyway Communications Holdings was based on a algorithm Tierra Verde resident Brent C. Kovar patented that was designed to revolutionize wireless communication for security and entertainment on airplanes.

Skyway said it was focused on bringing to the market a network supporting aircraft-related service including anti-terrorism support, real time in-flight surveillance and monitoring, Wi-Fi access to the Internet, telephone service and enhanced entertainment service for commercial and private aircraft throughout the United States.

``He`s a true believer in his technology,`` said Silverstein, his lawyer. ``It was processed through the U.S. patent office and it was registered, and nobody has ever saw the need to reexamine it or to challenge that the patent is bona fide.``

Skyway courted investors and political heavyweights such as Sen. Mel Martinez, bought a fleet of Humvee vehicles, created a mock aircraft cabin in a theater at its Clearwater headquarters and bought two DC-9 planes.

Skyway principals, including president Kovar, crisscrossed the country seeking partnerships and investors, according to court records and the accounts of former employees and partners.

A series of news releases heralded their progress, and deals were signed with companies such as XO Communications and the now defunct Southeast Airlines.

In the process, an American Express Card in the name of both Kovar and Skyway racked up more than $1 million in charges, court records show.

``There was a personal credit card used for friends and employees of the company that they`ll say was for schmoozing clients,`` Talib lawyer Wolfson told the judge Monday. But the commingled card included trips to Las Vegas, ``and trips to buy jewelry in the Caribbean. A typical case of abuse of power when people entrust money to you.``

In November, citing a series of misleading press releases and disclosure lapses, Talib sued SkyWay and officers Kovar and Kent first in federal court in Arkansas, a case later moved to Tampa and the Middle District of Florida.

``SkyWay intentionally or negligently failed to disclose to plaintiff Talib and his clients that SkyWay did not possess such technology and that it was simply in the stage of testing to determine whether in fact it could provide such services to commercial airliners at all,`` the complaint said.

While procuring millions of dollars from Talib, the company`s officers ``engaged in a variety of activities which squandered and wasted corporate assets and benefited them personally,`` the complaint reads. Specifically, that includes the purchase of the six Humvees for $300,000 claimed to be used for marketing and the hiring of family members at high salaries not commensurate to their skills, public filings say.

That included the $100,000 purchase of a skybox at Raymond James Stadium, the complaint read.

The action further alleged, among other things, violation of securities laws and breach of fiduciary duty.

Debtor: investors were savvy

Skyway principals, including Kovar, his mother and other officers vehemently deny the allegations in public filings and answers.

``The only issue is whether these sophisticated investors knowing they were investing in a development stage company were somehow duped,`` Silverstein said. ``There`s no shred of proof to that since Mr. Talib was intimately involved in management decisions and put his dad on the board. He proceeded to drive in his Skyway Hummer between Arkansas and Florida and obviously made representations to investors, and we don`t know what he may have said.``

In April, a series of board resignations and additions failed to keep the company afloat, and the Talib parties sought and won an injunction to keep assets in place.

Skyway filed for Chapter 11 bankruptcy protection June 14.

Nazar Talib didn`t return several calls seeking comment. Nor did his former attorney, Stanford R. Solomon in Tampa, despite repeated requests for comment.