SHERMAN, Texas — A forensic accountant testified Thursday that more than $740 million flowed through an Oklahoma City aircraft title company in the alleged sale of aircraft that did not exist or not actually sold.
The company’s owner, Debra Lynn Mercer-Erwin is on federal trial in Sherman in what prosecutors have described as an alleged Ponzi scheme.
The accountant, Grace Howe, testified that her analysis found Mercer-Erwin kept almost $5 million in escrow fees over four years.
Another $75 million flowed to her alleged accomplice, Federico Machado, now a fugitive in Argentina.
Howe testified that she used an analysis of bank statements, escrow agreements, email texts and phone records to verify and analyze what prosecutors described as a “secret ledger” of plane sales maintained by Mercer-Erwin and Machado.
Howe said she discovered that the same 22 aircraft were repeatedly sold in 47 transactions from 2015 through 2020. The aircraft, however, never appeared to be sold.
“I did not identify any closing documents or bills of sale,” she told the jury.
For most of the day, prosecutors and Howe walked jurors through different transactions to explain how the alleged scheme worked.
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.
Investors signed agreements with Mercer-Erwin and Machado dictating that they would receive a large up-front fee for putting up the “fully refundable deposit” so that Machado could buy planes. Investors wired the money into escrow accounts at Wright Brothers Aircraft Title, headed by Mercer-Erwin.
The agreements with Mercer-Erwin dictated that the escrow deposits were to remain in the account, to be returned only 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, Howe said ledger and bank records showed the money flowed to repay prior investors and into the coffers of entities controlled by Machado.
Though Machado was the buyer, millions of dollars in deposits flowed to him.
“It’s strange that the buyer would be receiving funds,” Howe testified. “The buyer should be sending funds.”
Howe testified that about $746 million flowed through the Wright Brothers accounts in connection with the alleged scheme.
Her analysis also showed that, by 2020, 45% of Wright Brothers account activity was connected to the plane deals.
Outside court, Mercer-Erwin and her attorney, Joe E. White Jr., declined to comment on what prosecutors have previously described as “phantom planes.”
During his cross-examination, White questioned Howe about a 2017 text from one of the key investors to Machado. It said, “Mother and daughter are going to jail. LOL.”
White clearly brought up the text to bolster his contention that Mercer-Erwin had been conned.
However, that alleged scheme continued for another three years after that text was sent.
When he left court, White declined to comment to WFAA about the text message or provide a copy of the text. He said U.S. District Judge Amos L. Mazzant III, had invoked the rule that he’s not allowed to comment on testimony or evidence.
Asked how he thought the case was going, White replied, “It doesn’t matter what I think. It matters what those 12 jurors think.”
“Once this thing's over with - hoping we get the good Lord's blessing on us - and we get acquitted, I'll be happy to talk to you then,” he said.
In an interview that aired in February, Machado acknowledged he had funneled money given him to him by investors into his Guatemalan mining operation.
"There's not a line of old ladies that got cheated, OK. It's a group of a few people,” he told WFAA via Zoom. “They thought they were investing in something. They invest in something else."
Machado remains an international fugitive. He is fighting extradition from Argentina.
Mercer-Erwin, who also owns a company called Aircraft Guaranty Corp., is also accused of putting aircraft into the hands of narcotraffickers.
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.
Prosecutors alleged that Mercer-Erwin “looked the other way” and allowed narcotraffickers to put planes in trust with her company.
Mercer-Erwin’s attorney claimed she did nothing wrong and followed all laws and rules related to trust agreements.
Prosecutors and investigators have said that 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 pled guilty Monday 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.
The federal trial resumes Monday in the Paul Brown U.S. Courthouse in Sherman.