SHERMAN, Texas — Aircraft trust company owner Debra Lynn Mercer-Erwin took the stand for five-and-half hours Thursday, telling federal jurors she never confessed to committing any crimes.
Her testimony directly contradicted two federal agents who previously testified that Mercer-Erwin acknowledged taking part in a Ponzi scheme involving fake plane deals with her alleged co-conspirator.
The agents testified that she admitted in proffer statements, during two interviews after her arrest in December 2020, that up to 10 of her planes ended up in the hands of drug smugglers.
The proffers were made in part to cooperate in a federal investigation into her companies. However, Mercer-Erwin later changed her mind and decided to go to trial on the charges filed in a multi-part indictment.
The agents also claimed Mercer-Erwin told them she hoped to get a “big payout” from an alleged Ponzi scheme she acknowledged ran from 2014 to 2020, fueled by the sale of up to 100 fake airplane transactions involving at least $500 million.
A forensic accountant also 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, Federico Machado, and pocketed $4.9 million in escrow fees. Machado is a fugitive in Argentina.
However, in court Thursday, Mercer-Erwin denied pocketing any escrows fees that were not “legitimate” and claimed she did not violate any U.S. laws.
She also claimed to thoroughly vet foreign nationals whose planes she placed in non-citizen trusts through her other company, Aircraft Guaranty Corp.
Prosecutors, however, claim she failed to adequately vet the foreign nationals, and as the trust owner, 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.
The trial represents the first time in U.S. history that the owner of an aircraft trust company has been tried on drug smuggling and export violations.
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 others.
Two planes – one seized in Guatemala and another in Belize in 2020 -- were found to be carrying a total of more than 3 tons of cocaine, records show. Mercer-Erwin has been indicted in connection with those planes as well as a third plane shot down by the Venezuelan military on a clandestine runway in July 2020.
Mercer-Erwin testified that prior to her arrest, she had never had any issues with the FAA.
She also testified that she had no idea the planes registered by her company were being used by drug smugglers and that if she had known, her company would never have registered the planes. She testified that once she became aware the plane had been used in drug activity, she moved to remove her company as the registered owner.
She also testified that her company did background checks to ensure people were properly vetted.
However, testimony has shown that the case of the Guatemalan plane, a simple Google search would have shown that the person she was registering the plane for was a convicted drug smuggler who’d been deported from the United States.
A former Aircraft Guaranty employee, Fe Lane, who was a defense witness, testified that they 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.
Homeland Security Investigations Special Agent Justin Marshall testified Wednesday that 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.
Marshall also said Mercer-Erwin told agents Aircraft Guaranty Corp. failed to use all the capabilities of a background check program and accepted passports at face value from non-citizen applicants.
Marshall also said she admitted to running a Ponzi scheme with her alleged accomplice, Federico Machado, through Wright Brothers Aircraft Title.
A key piece of evidence in the alleged Ponzi scheme has been what prosecutors have called a “secret ledger” that was sent via email between her and Machado.
In her testimony, Mercer-Erwin sought to distance herself from Machado and the ledger.
“It was (Machado’s) account of his transactions,” she testified. “I didn’t have a clear understanding of the ledger he was providing me.”
However, court testimony has shown that “ledger” and corresponding banking records showed investors wired escrow deposits into a Wright Brothers trust account.
Investors signed “escrow agreements” with Mercer-Erwin’s company dictating the escrow demands were to remain in the account, to be returned to the investor once the plane sales were completed or upon the investor’s request for reimbursement.
Instead of the deposits staying in the account as required, forensic accountant Grace Howe previously testified that ledger and bank records showed the money flowed to repay prior investors and into the coffers of entities controlled by Machado.
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.
Mercer-Erwin’s attorney, Joe White, asked her why she would send money to Machado or others from the escrow account, she replied, “The lender would give (Machado) that ability.”
Mercer-Erwin testified that about 10 of the dozens of plane transactions listed on the 23-page ledger appeared to be legitimate.
She also denied using escrow fees from the alleged scheme for her personal use.
She testified that she first met Machado in 2005 or 2006 at an aircraft industry event in Florida. She said she only met Machado five or six times in person and always in the presence of her husband.
She also testified that in 2012, he showed up uninvited to her son’s funeral and that “he made a spectacle” of himself. She said Machado did not know her son and she did know why he would show up.
“He was outgoing and somewhat unusual,” she testified. She called him a “fast talker” and said she had a difficult time understanding him when he spoke.
Mercer-Erwin has not explained to jurors how she came to be involved in the plane deals with Machado.
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.”
Mercer-Erwin was questioned by federal investigators after her arrest. Her initial interview, during which she denied being involved in criminal activity, was recorded.
However, the two proffer statements she gave in the presence of her attorneys, federal agents and prosecutors were not recorded. It was during those two statements that federal investigators say she confessed to criminal activity.
Mercer-Erwin’s testimony will continue Friday. The prosecution team has not yet had the opportunity to cross-examine her.
Moffett has pled 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.