SHERMAN, Texas — Oklahoma City businesswoman Debra Lynn Mercer-Erwin told federal investigators she could have done more in background checks when allowing foreign nationals to gain U.S. registration for their aircraft, according to testimony from a special agent Wednesday.
Mercer-Erwin told agents that her company, Aircraft Guaranty Corp., failed to use all the capabilities of a background check program and accepted passports at face value from non-citizen applicants.
Up to 10 planes that AGC had transferred titles were found linked to drug smuggling, she said.
Two of the planes seized in Central America in 2020 were found to be carrying a total of more than 3 tons of cocaine, records show.
Mercer-Erwin made admissions to federal authorities in written proffers, agreeing to cooperate in a federal investigation. However, she later changed her mind and decided to go to trial on the charges filed in a multi-part indictment.
In her proffer statements, federal agents testified that Mercer-Erwin said she hoped to get a “big payout” from an alleged Ponzi scheme she said ran from 2014 to 2020, fueled by the sale of up to 100 fake airplane transactions involving at least $500 million.
A forensic accountant has testified that Mercer-Erwin funneled $75 million from an escrow account at her other company, Wright Brothers Aircraft Title, to her alleged accomplice, Federico Machado, and pocketed $4.9 million in escrow fees. Machado is a fugitive in Argentina.
Homeland Security Special Agent Justin Marshall, who interviewed Mercer-Erwin twice in December 2020, testified that she agreed to follow Machado’s orders.
Marshall said Mercer-Erwin claimed she was told by Machado “when, where and how to disburse funds.”
“She (Mercer-Erwin) indicated that she was in too far,” Marshall said. “Didn’t have the money to get out.”
In the alleged Ponzi scheme, prosecutors have argued investors were duped into what was supposed to be short-term loans, with low risk and high reward. However, the investors allegedly lost some $240 million, according to court records and their civil attorneys.
Federal prosecutors and investigators have said a series of stories WFAA first aired in 2019 spurred a federal investigation that resulted in the indictments of Mercer-Erwin, her daughter, Kayleigh Moffett, and Machado, along with others.
While holding planes in trust, prosecutors allege Mercer-Erwin did not know the whereabouts of many of her planes and failed to file documents legally required when planes were taken out of the country.
Homeland Security Investigations Special Agent Jesus Villarreal also testified Wednesday that Aircraft Guaranty had 1,000 aircraft in trust, including more than 100 from Mexico.
He testified that Aircraft Guaranty registered several planes on behalf of foreign nationals with links to drug smuggling. Evidence showed the planes would be taken out of the country and soon would be found laden with large amounts of cocaine in Latin and Central America.
Villarreal told the jury that companies like Aircraft Guaranty have the “duty to monitor” planes in their trust.
However, Mercer-Erwin’s attorney, Joe E. White Jr., has disputed Villarreal’s reading of federal regulations.
“Where is that says she is deputized?” White asked Villarreal.
White argued that federal authorities such as the FAA accepted the trust applications filed by Aircraft Guaranty and cannot defer their law enforcement duties to trust companies.
Former Aircraft Guaranty employee Fe Lane testified that the trust company has done the same degree of “due diligence” in conducting background checks since before the company’s purchase by Mercer-Erwin in late 2014.
Lane, a defense witness, said that under the previous owner, Connie Wood, the trust company had special concerns about non-citizen aircraft owners from Mexico, Central America and South America.
She said Aircraft Guaranty made sure passports were “legible, readable” but did nothing additional to ensure the passports were valid.
“I don’t know whether you can fake a passport,” she testified.
Lane also testified that company employees did background checks to make sure applicants were not on a terrorist and drug kingpin list with Office of Foreign Assets Control, or OFAC. They would also obtain copies of passports and, in some cases, utility bills to confirm addresses.
Prosecutors, however, have argued that the OFAC list isn’t sufficient, and lacks the names of mid-level to lower members of drug cartels.
They have argued that other forms of “due diligence” such as a simple Google search would have uncovered the background of Heriberto Gastelum-Calderon, a convicted drug smuggler who had been deported from the U.S. in 2010.
Gastelum was able to file a bill of sale transferring ownership of his plane to Aircraft Guaranty.
On Feb. 27, 2020, Belize authorities seized the plane in a clandestine airstrip with 2,310 kilograms of cocaine.
Testimony will continue Thursday.