Former air service owner pleads guilty to 15 federal counts

Agreement ends largest investigation of money laundering in state history

Posted: Thursday, March 08, 2007

ANCHORAGE - The former owner of an Anchorage air charter service pleaded guilty in federal court to charges he participated in a scheme to swindle an elderly widow and her trust fund out of more than $52 million.

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Mark Avery pleaded guilty Tuesday to 15 felony counts as part of a plea agreement that ended the biggest money-laundering investigation in Alaska history.

Avery, an attorney and former prosecutor, paid $8 million - $1 million more than the asking price - for Security Aviation in 2005. He then stocked Security Aviation and related companies with helicopters, Gulfstream executive jets and Czech-built L-39 military fighters.

But it's his personal spending on boats, motor homes, vintage warplanes and snowmobiles detailed as unjustifiable in the charging document filed Tuesday. Avery also bought a house for a company principal and paid off two mortgages for his own homes with trust money, according to the document.

U.S. District Court Judge Ralph Beistline asked Avery how he pleaded on 10 counts of money laundering and five counts of wire fraud.

"Guilty to each," Avery said.

The case is the largest money laundering investigation in state history and required analysis of "a virtual mountain of records" to trace how Avery came to control the trust fund money, according to Terry Zeznock, a supervisory special agent with the Internal Revenue Service. The FBI, the IRS and the U.S. Attorney's office were involved in the investigation.

Last year Security Aviation and a principal, Robert F. Kane, were facing federal weapons charges. They were accused of illegally possessing rocket launchers. A federal jury acquitted them in May after a nine-day trial.

On Tuesday, Avery agreed to forfeit the rocket launchers.

According to his plea agreement, Avery's possible sentence ranges between 14 and 17 years.

Avery was a trustee for the May Smith Trust, which provided for May Wong Smith's care. He also was a trustee for the separate May and Stanley Smith Charitable Trust, which donated money to educational groups and charities.

In June 2005, at a time his business accounts had a balance of $3,413, Avery began to borrow against the assets of the May Smith Trust, according to the charging document. The plan was to obtain executive jets.

"In exchange for the loan, the trustees of the May Smith Trust received heavily discounted and free jet service," the government said in a three-page statement.

Avery knew May Smith had dementia, required full-time live-in care, and never would have consented to the deal, according to the government. Smith died in July 2005. The aircraft financing scheme "bore no benefit to her, and it put the core principal of the May Smith Trust at risk of loss with no determinable return," the document said.

"Specifically, Avery used the assets of the May Smith Trust for his personal use with no written business plan, no controls over how the money was to be spent, no collateralization, no terms written as to the source of repayment, no timetable for repayment of principle or contract for use of the funds," the document said.

In his plea agreement, Avery acknowledged he owes the May Smith Trust more than $52.1 million in restitution.

Avery filed for bankruptcy last year. Much of what he acquired is being sold through bankruptcy proceedings.

Scott Dattan, Avery's court-appointed lawyer in the criminal case, said discussions with the U.S. Attorney's office about a plea deal have been going on for three months.

Dattan said the government has asked Avery about the role of the other May Smith trustees, Kane, and others. According to the charging document, the trustees allowed Avery to use the trust assets as collateral and also refers to Avery scheming with an unnamed person to get the money.

The other trustees, Dale Matheny and John Collins, have sued Avery in California over his spending of the trust money. They also have intervened in the bankruptcy case.

Avery, who is temporarily stripped of his position as a May Smith trustee, has said in court filings that the trustees knew what he was doing. The government was looking at "possible criminal violations by all three trustees," an attorney for Avery said in an October filing.



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