Testimony continues in Onalaska Ponzi scheme trial

SHERMAN, Texas — The proprietor of an Oklahoma City plane name corporate pocketed between $10,000 and $100,000 in escrow charges for each and every airplane sale whilst facilitating an alleged Ponzi scheme, consistent with federal court docket testimony Wednesday.

Prosecutors have alleged Debra Lynn Mercer-Erwin, the president of Wright Brothers Aircraft Title, amassed a complete of $4.9 million in escrow charges over 4 years. However, prosecutors have alleged that she failed to carry investor cash in escrow as promised.

“As soon as the money came in, it was sent out to pay other investors,” Homeland Security Special Agent Justin Marshall testified.

“Her role in this game is what is most important,” Marshall stated. “She controlled the money.”

Prosecutors have alleged the planes concerned in the Ponzi scheme both didn’t exist or weren’t on the market. They say she conspired along with her co-conspirator, Federico Machado, to defraud traders.

Machado owned a Florida-based trade referred to as South Aviation, in addition to a number of different entities. Machado is now a global fugitive. He’s preventing extradition from Argentina.

Prosecutors have alleged that 30% of Wright Brothers trade over a five-year duration used to be a part of the alleged Ponzi scheme. In all, $750 million flowed thru Wright Brothers as a part of the alleged scheme, Marshall testified.

Investors, consistent with court docket information and their legal professionals, misplaced greater than $240 million in the alleged Ponzi scheme.

Deloitte forensic accountant Grace Howe testified about her assessment of financial institution information, telephone information and a ledger of airplane gross sales involving Mercer-Erwin and Machado.

Howe testified that her assessment discovered transactions that lacked proof or evidence of a invoice of sale.

According to Howe, right here’s the way it labored:

Investors signed escrow agreements with Wright Brothers. The escrow agreements mentioned that Wright Brothers would grasp the cash in the escrow account, pending Machado’s acquire of the planes.

In go back for placing up the cash, the traders right away gained massive charges. Under the phrases of a freelance, all their cash could be returned to them a couple of months later as soon as Machado finished the plane purchases.

The contracts stated that the traders “may at any time demand the return of the escrow funds for any reason.”

Also, the contract stated that “in no event and under no circumstance shall the escrow agent disburse the deposit or any portion” of the deposit to “any person or entity other than the depositor.”

Howe detailed 3 transactions, alternatively, to turn what took place to the cash.

*In March 2020, an investor deposited $6 million right into a Wright Brothers account. In alternate, the investor gained an instantaneous $300,000 cost.

However, as a substitute of the cash staying in the escrow account, $375,000 went to Machado’s corporate, South Aviation, consistent with Howe’s assessment.

Millions of alternative bucks went to pay traders from prior airplane offers, Howe testified, in line with her assessment of a ledger and financial institution information. The ledger confirmed that Mercer-Erwin gained a $50,000 escrow charge.

*In June 2020, any other investor put in nearly $10 million. Instead of the cash staying in the account as required through the escrow settlement, $6 million went to the prior investor, consistent with Howe’s assessment.

Nearly $3 million went to an entity managed through Machado. Mercer-Erwin once more gained a $50,000 escrow charge, information confirmed.

*In August 2020, a couple of months later, any other investor deposited greater than $19 million for any other set of airplane offers.

Again, the cash didn’t keep in the account as agreed, Howe testified. Records confirmed $10 million went to pay again the investor from the prior deal, in addition to traders in different airplane offers. Companies managed through Machado gained about $1.5 million.

Howe testified that right through that six-month duration in 2020, Mercer-Erwin gained $865,000 in escrow charges, and $13.5 million flowed to entities managed through Machado.

She stated it didn’t make sense for cash to drift from Wright Brothers to Machado since he ostensibly used to be the patron at the airplane offers.

She additionally testified she may to find no expenses of sale, letters of intent, or different information setting up that any planes have been in truth bought through Machado as a part of the ones 3 transactions.

Joe E. White Jr., an legal professional for Mercer-Erwin, has stated his consumer used to be deceived through Machado into dealing with escrow bills tied to the alleged Ponzi scheme.

WFAA spoke to Machado by way of Zoom, and he said siphoning investor cash right into a Guatemalan mining operation. However, he instructed WFAA he hopes to reimburse the traders.

Mercer-Erwin, who additionally owns an organization referred to as Aircraft Guaranty Corp., may be accused of striking plane into the fingers of narcotraffickers.

Under U.S. legislation, international nationals can not get U.S. registration for his or her plane. However, the FAA permits international nationals to realize U.S. registration for his or her plane through moving the name to a consider corporate.

Prosecutors alleged that Mercer-Erwin “looked the other way” and allowed narcotraffickers to place planes in consider along with her corporate.

Mercer-Erwin’s legal professional claimed she did not anything improper and adopted all rules and regulations associated with consider agreements.

Prosecutors and investigators have stated {that a} sequence of news WFAA first aired in 2019 spurred a federal investigation that resulted in the indictments of Mercer-Erwin, her daughter, Kayleigh Moffett, Machado and others.

Moffett pled accountable Monday to twine fraud and no longer correctly reporting that planes were taken abroad. She authorized a deal for 5 years of probation.