Per 14 CFR 61.153(c) candidates for an ATP license must "be of good moral character".
What does that actually mean and how does an examiner or the FAA verify it?
An examiner uses the contents of FAA Order 8900.1 - Flight Standards Information Management System (FSIMS)as guidance for doing their job.
As you might imagine, there is some guidance available for them there:
- VOLUME 5 (AIRMAN CERTIFICATION)
- CHAPTER 2 (TITLE 14 CFR PART 61 CERTIFICATION OF PILOTS AND FLIGHT INSTRUCTORS)
- Section 18 (Conduct an Airline Transport Pilot Certification, Including Additional Category/Class Rating)
- Paragraph 5-704 (ELIGIBILITY –ATP CERTIFICATE – AIRPLANE, ROTORCRAFT, AND POWERED LIFT):
- C. Good Moral Character Requirement:
An applicant must be of good moral character. The inspector must ask an applicant if the applicant has been convicted of a felony. If the applicant’s answer is affirmative, the inspector should make further inquiry about the nature and disposition of the conviction. If an inspector has reason to believe an applicant does not qualify for an ATP certificate because of questionable moral character, the inspector must not conduct the practical test. Instead, the inspector will refer the matter to the immediate supervisor for resolution. The supervisor may need to consult with regional counsel for a determination concerning whether the applicant meets the moral character eligibility requirement.
That's the basic guidance that the examiners have, but there are also legal cases that have delved into this area and give more specific examples. I found a blog which covers it in some detail at All About Airplanes. Falsification of documents, embezzlement, and acting in a malicious manner towards others are cited as reasons that ATP certificates have been denied or revoked.
In 1994, four years after he had disposed of the last of his interests in other airlines, the FAA denied Frank Lorenzo an operating certificate for startup airline ATX, saying that Texas Air, Eastern, and Continental "experienced operational, maintenance and labor-related problems that were among the most serious in the history of U.S. aviation."
Loenzo's rejection was described in a New York Times article dated 6 April 1994.
This rejection was not for the ATP certificate, but for an operating certificate (which is issued to the ATP's employer).