Crime & Courts

Alaskan with ties to government operative headed to trial in $52M fraud case

The strange tale of Mark Avery and the wreckage of his Anchorage security and aviation businesses is set to unfold anew next month with a trial on federal charges that he siphoned $52 million from a wealthy widow's trust — and blew about all of it.

U.S. District Judge Ralph Beistline this week determined the case is ready for trial.

Avery's public defender, Mike Dieni, had argued for a delay. The defense wanted to force the government to provide classified records on the undercover work of the mysterious Rob Kane, Avery's one-time top associate and the man now portrayed by the defense as his Svengali.

But Beistline on Monday said he didn't find justification for those records or to postpone the trial.

Then on Tuesday afternoon, a new wrinkle developed. Dieni filed a motion asking the judge for permission to step aside. His reasoning? That document was filed in a secret document sealed off from the public. A hearing on the matter was quickly set for Wednesday morning. It will mainly be closed, even to the prosecution.

Dieni, reached by phone Tuesday, said normal attorney-client confidentiality meant he couldn't talk about what caused him to seek removal from the case. But if Avery gets a new attorney, it is almost assured that the trial could not begin in less than two weeks.

The prosecutor, Assistant U.S. Attorney Steve Skrocki, said in a filing late Tuesday Avery's effort to switch lawyers was a last-ditch tactical move designed to put off a trial that has been set for six months. Dieni has done extensive work on the case and secured favorable rulings for Avery, Skrocki said. Avery earlier complained about his previous defense lawyer and his bankruptcy attorney.

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Recent court filings in the case reveal more dimensions of a shadowy world that Alaskans first glimpsed a decade ago when Avery's Security Aviation business and Kane were found not guilty of charges related to possession of two Soviet-origin rocket launchers that mount to aircraft. More details trickled out through a 2007 criminal fraud case against Avery, civil lawsuits, and a bankruptcy case through which Security Aviation was sold back to its former owner. But the whole story has not been told.

Avery, 56, is a former Anchorage city prosecutor who now is disbarred. He faces 17 felonies: five counts of wire fraud, 10 counts of money laundering, plus bank fraud and making false statements to a financial institution.

'A buying spree'

Avery is accused of concocting a scheme to take millions from the private trust that he was supposed to guard, a fund set up to care for May Wong Smith, a Chinese woman whose late husband, Stanley Smith, was an Australian who made millions mining in Malaysia.

"Avery went on a buying spree likely not ever experienced in the annals of this city or this state as he burned through $52 million of May Wong Smith's money in six months," prosecutor Skrocki said in a trial brief filed in court last week.

The facts underlying the current case are essentially the same as in 2007, when Avery pleaded guilty to wire fraud and money laundering related to the May Smith Trust. Then in 2013, when Avery was more than half done with an 8½-year prison sentence, that case was thrown out in the aftermath of a 2010 U.S. Supreme Court ruling that found the kind of fraud he admitted to only applied in cases of bribery and kickbacks. He's now charged with a different kind of fraud.

The trial is expected to take about three weeks, counting jury selection. Before the new twist over Avery's attorney, it was set to begin Feb. 8 or soon after, depending on the conclusion of another trial over which Beistline is presiding. Skrocki said in court filings he plans to call 30 witnesses.

One will be Kane, who didn't take the stand at his own trial and hasn't spoken publicly about the wild spending and other events at issue.

"We are calling him as a witness in our case, not as a star witness, but as a fact witness and a participant," Skrocki said in court Monday.

Avery has said he was duped by the charismatic and forceful man known as "Commander Kane," though Kane was never a military officer.

Both sides have agreed that Kane "is a chronic fabricator," Dieni said, yet his role is key. If Kane were working as a government agent at the time of the events at issue, that gives Avery a path to a defense that he was entrapped, according to his lawyer.

'Globetrotting informant for the FBI and the CIA'

Kane, the son of an Anchorage policeman, worked off and on as a government informant for law enforcement and intelligence agencies for as long as 20 years, Dieni said in court Monday.

Prosecutors must provide the defense with any evidence they collect that could help prove innocence. Skrocki said in a Friday court filing he gave the defense two letters explaining Kane's relationship with government agencies, including the FBI. In addition, an FBI agent who's been described as Kane's handler, Bob Coffin out of Clearwater, Florida, said Kane wasn't working a case against Avery for the FBI, the prosecution filing said.

The defense had sought the underlying classified documents themselves, not summary letters. But even that summary material shows that Kane provided information to the FBI and CIA, and traveled as an informant "to multiple foreign countries," Dieni said in a Friday court filing. The FBI had paid him for his work.

Perhaps, Dieni said, the government wanted Avery to expand his security and aviation businesses. It was under Kane's direction, the defense says, that Security Aviation bought L-39 Czech fighter jets and tried – but failed -- to get military training contracts.

The rocket pod launchers were intended for the fighter jets but Skrocki – the lead prosecutor in that case, as in the current one -- was unable to prove they were militarized and not just for show.

Kane wanted to go even further, the defense said, into prisoner transports for the CIA and even the movement of captured terrorists — the infamous "extraordinary renditions" carried out by the CIA in which terror suspects were kidnapped in one country and brought to another, often where torture was practiced.

"Kane's role as globetrotting informant for the FBI and the CIA and other unnamed government entities likely played a role in inducing Avery to … acquiesce to the decisions that were made in building the air transport and related services the government now declares to be criminal," Dieni said in the Friday court filing.

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But Judge Beistline said while the relationship between Kane and Avery was interesting, "how they chose to spend the money was between the two of them and really not particularly relevant to the alleged crimes."

Avery was educated and "seemed to be in control of the situation," Beistline said in court. "There's no evidence that Mr. Kane acted as a government operative when dealing with Avery with regard to the crimes that we are talking about here in this indictment."

Avery, who is from San Francisco, was one of three trustees over the May Smith Trust, of about $100 million, and the bigger May and Stanley Smith Charitable Trust of $350 million. Avery's father, Luther Avery, was a noted San Francisco tax attorney and one of the original trustees, and after he died, Avery inherited the position, which paid $600,000 a year.

"Even those fees were not enough," Skrocki said in the trial brief.

In April 2005, before the spending spree, Avery was broke and couldn't even make payments on his Anchorage duplex, the trial brief said.

May Smith was frail and suffering from dementia when Avery arranged for her to be moved by private charter from the windswept island of Guernsey, in the English Channel, to the Bahamas. According to the charges, that charter early in 2005 was the seed for the fraud. Avery convinced the two other trustees to let him use her trust as collateral for a type of loan that functions like a line of credit, telling them the money would buy executive jets they could then use for free or at a discount, the charges say.

By June 2005, he had $35 million in hand from the $52 million loan, the prosecution's trial brief said. By that August, he had bought a million-dollar Mustang, the iconic World War II fighter, and three luxury motor-homes. He had paid off $630,000 in debt. He bought a $300,000 rugged Moose Boat and a museum-quality Corsair, a Navy World War II plane, for $2.4 million that he gave to Kane.

By year's end, the money was gone and Security Aviation was falling apart.

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"Avery's orgy of spending, the government will show, was the end result of personal greed, breach of trust, payment of debt and the impulsive accumulation of planes, boats, cars, homes, and motorhomes by Mark Avery without any business purpose and more importantly no purpose or benefit to May Wong Smith or her trust," the trial brief said.

May Smith died in 2006, and the money from her trust was supposed to go to charity. About $8 million was recovered through sales in the bankruptcy case but her trust lost $43 million, Skrocki said.

"In this case, Mark Avery became his own charity, and used her money as his own," the prosecutor wrote.

Lisa Demer

Lisa Demer was a longtime reporter for the Anchorage Daily News and Alaska Dispatch News. Among her many assignments, she spent three years based in Bethel as the newspaper's western Alaska correspondent. She left the ADN in 2018.

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