The finance director was getting concerned. Some 11 relationship banks and lessors had said they were not prepared to lend money for a regional aircraft due in 2002 and he was running out of options.

He remembered that a company called AviaLease Global had written to him several times saying that it was still lending money, so he looked up their number and gave them a call. It turned out to be an expensive decision. "You have to remember that 18 months ago you just couldn't find money anywhere," says the new finance director at the airline. "We were starting to get a bit desperate, so my predecessor decided to give them a call."

Although the carrier had never worked with the boutique, it sounded familiar and Peter Nicol, AviaLease Global's managing director, flew from Glasgow to meet the airline.

The airline mandated AviaLease Global to structure a sale/leaseback on a regional aircraft and paid a deposit and upfront fees totalling $250,000. "This was a mistake and we should have seen the signs. For example, when I took over the job, I did a quick search for EuroSolv [AviaLease's parent company] on the internet and the only pages I found for the name were for a Greek porn site," says the finance director. "We also discovered that whenever you called you always got the same secretary answering your call – no matter who you called. You were then called back by mobile. The warning signs were there."

In fact the airline had handed money over to a small company that may never have closed an aircraft deal. It also did not know that two police forces were investigating Nicol for fraud.

But everything seemed fine to start with. In September 2002, AviaLease Global hired an appraiser and paid for it to visit the aircraft's manufacturer, which was carrying out maintenance on the aircraft. According to the new finance director, Nicol asked reasonable questions about the deal. The boutique's lawyers began discussions with the manufacturer.

The airline started to get concerned towards the end of 2002. "The first questions were sensible, but then they got ridiculous," says the director. "Although they never actually admitted that they couldn't get funding, it was clear to us that they were not going to finance the aircraft in time."

In December the airline asked AviaLease Global to return the cash it had been paid. At first the boutique offered to return a large proportion of the fee. However, after several companies called the airline to ask for references for AviaLease Global – and the finance director says he "clearly laid out the troubles they had encountered so far" – the boutique threatened to withhold some cash, claiming the airline had tarnished its reputation.

Angered by this, in October 2002, the airline asked London law firm Clyde & Co to help recover all the fees and deposit it had paid.

Working with a local law firm, Clyde & Co applied to a Scottish court to have EuroSolv's accounts blocked. However, the boutique paid the airline most of the fees and deposit it had received before the case went to trial. The airline received most of its money in July 2003 and wrote off the rest as experience.

Another European carrier has a similar story. It also paid fees to the boutique and AviaLease Global again failed to close a deal, although in this case the airline was introduced to Nicol by an aviation consultancy.

A representative from the consultancy says that, although it did work for AviaLease Global, it was not aware of its reputation. The consultants also had problems getting their fees for technical services paid by AviaLease Global.

The airlines that have paid cash to the boutique are understandably embarrassed to have been caught out and have asked not to be named. Several others are believed to have also paid money to AviaLease Global, including carriers in Africa, Europe and Asia.

Nicol did not wish to comment on the allegations and directed all questions to his lawyers, Scottish firm Burness. He says this is just AviaLease Global's strategy. "We have a policy of not discussing our business with the press and that will remain – good or bad," says Nichol. Burness failed to reply to questions asked by Airfinance Journal.

Inside AviaLease Global

Both airlines say that they failed to research AviaLease Global thoroughly before handing over money, although apart from a website it is difficult to find too much information on the company.

AviaLease Global's main office is in Glasgow and it also has a representative office in London. The website says that AviaLease Global is "the aircraft finance and asset management division of EuroSolv, a prominent financial services company".

Nicol is a director of EuroSolv, which is a registered UK company. In its financial statements for the year ending December 31, 2001, EuroSolv had tangible assets of £508,675, with net liabilities of £392,739.

The website says that AviaLease Global company's ultimate parent is GZS EuroCapital, which is believed to be registered in the Channel Islands.

Sources in Glasgow say that Nicol specialized in consumer finance for a number of years before targeting larger deals, and letters from him sometimes list a consumer credit licence number.

The boutique's website says its mission is: "To be recognised by both aviation industry participants generally and our prominent competitors especially as representing the world's foremost provider of competitive, structured and flexible aircraft finance for all major aircraft types – without exception."

Marketing letters from Nicol often contain a range of aircraft finance terms and an explanation of how they can offer low rates.

In December 1998, in a letter to an airline, he wrote: "A range of creative re-marketing initiatives and cheaper head funds have combined to permit EuroCapital to increase its associated residual investments and accordingly reduce benchmark rates."

Two years later, he wrote to airlines claiming to be able to offer cheaper finance than other leasing companies could. "Upon completion we are confident that the inherent mix of low cost funds and AviaLease's aggressive (but justifiable) residual insurance policy will permit the further undercutting of our principle competitors' (ILFC, Gatx, Gecas, & Boullioun) short-term rates/rentals," wrote Nicol.

On September 14, 2001, he gave another explanation: "A fortunately timed foreign currency hedge by AviaLease's divisional parent company in Q1 2001, continuing low European Central Bank interest rates and our innovative/rewarding re-marketing of ex-lease aircraft have, at this time, all combined to allow us to offer the market the most competitive and flexible USD based leasing rates ever – guaranteed!" The letter also thanked "the sector once again for its increasing interest, support and uptake of the division's related added-value services". AviaLease Global was not prepared to provide a list of deals that it has closed.

Forgery accusations

Nicol has also approached airlines on behalf of a company called Eurocapital Asset Management, which claims also to be a member company of GZS EuroCapital. According to 1999 company filings, along with several members of his family, Nicol is also a director of Eurocapital Asset Management.

In March 2003, Nicol was charged with 23 forgery offences relating to leases for medical equipment brokered by Eurocapital Asset Management Ltd, following tendering processes by National Health Service Trusts.

The case was originally referred to the Serious Fraud Office by the NHS Counter Fraud Service and also investigated by Strathclyde Police, making it a rare cross-border fraud investigation because it involved both Scottish and English police officers.

The hearing is scheduled for September 6, 2004 at Southwark Crown Court in London.

Avoiding the traps

It is not surprising that the airlines which worked with the boutique are all small carriers without large finance teams. The two European airlines quoted are both regional airlines, and with many banks less interested in financing smaller aircraft, the ability to borrow from a new lender was particularly attractive.

"It is a difficult thing to police," says the managing director of one regional airline that paid money to AviaLease Global. "The problem is a lot of these guys are doing it from their house, so how do you know if someone is good, bad or ugly?"

AviaLease Global also approached a European lessor about buying a 737.

Overall, the lessor was more suspicious. "He had very good industry knowledge," says the chief financial officer of the leasing company. "He talked a good story. But there were lots of things that made you terribly suspicious: the same address never came up again, the number on his business card was never the same. The company name on the offer letter was different."

While Nicol claimed to have funding in place for the aircraft, unlike the airlines, the lessor was not prepared to pay upfront appraisal, legal, and insurance fees totalling £20,000 ($31,000) and pulled out of the deal.

"I could tell from the first meeting it didn't smell right. It was too agreeable. He accepted too many things too easily which just doesn't happen in this industry. You know the points where you are going to have to fight," says the CFO. "It was too good to be true."