Texas Air Says Examiner’s Report Flawed : Airlines: The firm blasts the claims that it improperly drained assets from its Eastern Airlines unit and says it will clear both companies’ names.

Texas Air Corp. and its bankrupt subsidiary, Eastern Airlines, on Friday lambasted a bankruptcy examiner’s report that concluded the parent company had improperly siphoned assets from Eastern.

The companies said the 500-page report filed Thursday with the federal bankruptcy court here by examiner David I. Shapiro “contained so many errors, and is so fundamentally misleading that serious and considered actions will be taken to clear the companies’ names.”

The announcement did not specify what action will be taken, but Texas Air spokesman Art Kent said, “We will let you know very soon exactly what we are going to do.”

Shapiro said in his report that Texas Air had drained as much as $403 million in assets from Eastern, which has been in bankruptcy proceedings for almost a year, without paying fair value for them. He cited 12 of 15 transactions that he said he had investigated.

Shapiro said, for example, that when Eastern sold its System One computer reservation system to the parent firm in 1987, it received far less than the system was worth.

The angry response by Eastern and its parent came even though Texas Air has agreed to repay Eastern $280 million.

“We were sandbagged,” the two companies said Friday. “The agreement we reached was designed solely to continue to provide Eastern with the resources and revenues to complete its rebuilding as a viable airline, 100% owned by Texas Air. In fact, we had publicly committed months ago to provide most of these resources unilaterally.

“Instead, we find ourselves in the intolerable position where our commitments to rebuild Eastern are being improperly used to imply that Texas Air somehow agrees with the totally erroneous conclusions in this slipshod, amateurish report, and that our assistance to Eastern somehow constitutes payment to settle any such liabilities.”

Shapiro, a lawyer in Washington, could not be reached for comment Friday.

However, a Los Angeles attorney and specialist on bankruptcies, Richard Broude, said Friday that he doubts that Texas Air and Eastern will formally challenge Shapiro’s report in a court action.

“Despite the agreement Texas Air may have entered into to avoid protracted and harmful litigation,” he said, “their position in the bankruptcy court will be, ‘Yes, we agreed to the settlement, but we contest the examiner’s facts.’ ”

Shapiro asserted in his report that if Texas Air had not entered into the agreement, which must be approved by Bankruptcy Court Judge Burton R. Lifland, he would have urged the appointment of a trustee to oversee all of Eastern’s affairs, effectively taking day-to-day operation of the airline out of the hands of its current managers.

Eastern filed for bankruptcy last March 9, five days after its machinists, pilots and flight attendants struck. Only the machinists remain on strike. But because of the airline’s reduced size and because it hired many non-union employees after the strike began, few of the pilots and flight attendants who struck have been able to return to their jobs.