SHERMAN, Texas — Aircraft trust company owner Debra Lynn Mercer-Erwin denied committing any crimes despite acknowledging her aircraft title company’s escrow account was used in a possible Ponzi scheme.
Mercer-Erwin took the witness stand for more than five hours in a federal trial Friday in which she faces charges of money laundering, drug trafficking, wire fraud and export violations.
Her testimony directly contradicted two federal agents who previously testified that Mercer-Erwin admitted she took part in a Ponzi scheme involving fake plane deals with her alleged co-conspirator, Federico Machado.
The agents testified that Mercer-Erwin told them she hoped to get a “big payout” from the alleged Ponzi scheme that she claimed ran from 2014 to 2020, fueled by the sale of up to 100 fake airplane transactions involving at least $500 million.
They claimed she also admitted that up to ten of her planes ended up in the hands of drug smugglers, according to proffer statements in two interviews after her arrest in December 2020.
“Are you saying he’s a liar?” prosecutor Lesley Brooks asked Mercer-Erwin while pointing at one of the federal agents.
“I think he’s an honest man,” Mercer-Erwin said. “But I did not say that.”
In cross examination, Brooks asked why Mercer-Erwin’s company, Aircraft Guaranty Corp., did not strengthen non-citizen trust background checks after learning about possible fake passports and discovering that up to 10 planes registered by her company had drug connections. Two of the planes were seized in Central America and found carrying more than three tons of cocaine.
“What is the magic number (of planes) that have to be caught for you to take action?” Brooks asked.
Prosecutors have repeatedly claimed Mercer-Erwin and her company, Aircraft Guaranty, failed to thoroughly vet foreign nationals whose planes she placed in non-citizen trusts. They also have claimed that as the trust owner, she did not know the whereabouts of many of the aircraft.
In effect, prosecutors allege she willfully turned a blind eye to criminal activity involving the planes she registered.
Under U.S. law, foreign nationals cannot get U.S. registration for their aircraft. However, the FAA allows foreign nationals to gain U.S. registration for their aircraft by transferring the title to a trust company.
Brooks also repeatedly questioned Mercer-Erwin about a taped third interview she had with federal agents when arrested in December 2020. Many of the questions centered on the alleged Ponzi scheme. The focus was on an escrow account at Mercer-Erwin’s title company, Wright Brothers Aircraft Title.
According to excerpts from the taped interview, Machado paid large escrow fees ranging from $25,000 to $60,000.
Mercer-Erwin, however, denied receiving fees for any of Machado’s alleged illegit plane sales.
“Are you telling me you let Fred Machado use the escrow for free?” Brooks asked. “…You would let him use your account as a money laundering operation?”
Despite agreements requiring written notice of withdrawals, Mercer-Erwin claimed lenders had given Machado authority to tell her when and where to send money from the escrow account.
“He (Machado) would borrow money from people and use money for whatever and repay by borrowing money from different people,” Mercer-Erwin explained.
Brooks said such an arrangement matched the description of a Ponzi scheme.
“Is that a Ponzi scheme?” Brooks asked several times.
“I’ll say yes,” Mercer-Erwin responded.
Brooks said that only about 10 of 190 transactions based on a secret ledger shared between Machado and Mercer-Erwin appeared to be legitimate plane sales.
A forensic accountant has testified that Mercer-Erwin funneled $75 million from an escrow account from her Oklahoma City-based company, Wright Brothers Aircraft Title, to her alleged accomplice, Machado. Mercer-Erwin allegedly pocketed $4.9 million in escrow fees, according to the accountant.
Prosecutors also said 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.
Investigators and prosecutors 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, Machado and others.
Moffett has pleaded guilty to wire fraud and not properly reporting that planes had been taken out of the country. She accepted a deal for five years of probation.
Machado is an international fugitive in Argentina.
Closing arguments in Mercer-Erwin’s federal trial are scheduled for Monday.