Crime & Courts

Ex-wife of defendant in $52M fraud case tells of lavish spending and a lie

The ex-wife of the defendant in a $52 million criminal fraud case in Anchorage filled in more of the trial story Thursday with testimony about lavish spending, a family trip to Disney World in the corporate jet and a backdated $2.6 million promissory note that she called a lie.

Jennifer Arnold, formerly Jennifer Avery, took the witness stand on the fourth day of Mark Avery's trial in U.S. District Court. Avery is charged with wire fraud, money laundering and bank fraud related to his spending from a loan backed by a trust set up to care for a frail, elderly widow.

All $52 million was spent in less than six months in 2005 and Avery ended up filing for bankruptcy the next year. Only $7.8 million was returned to the May Smith Trust through bankruptcy proceedings, Ruth Collins, one of the current trustees, told jurors Wednesday.

Back in 2005, Avery was one of the three trustees for two sizeable trusts. He convinced the others to invest in an aviation project that his lawyer maintains could have paid off. But prosecutors said much of the spending had nothing to do the medevacs and long-distance charters that Avery promoted as a perk for the trustees.

Avery's phenomenal spending — on military jets, executive jets, RVs, houses, boats and more — erupted into public view in 2006 after FBI raids and criminal charges against his Security Aviation business and his right-hand man, Rob Kane, of illegally possessing military rocket launchers. They were found not guilty. But in the aftermath, Avery lost everything. Security Aviation was regained by its former owner.

His family disintegrated too. Arnold said she and Avery legally separated in 2007 and divorced in 2013.

On Thursday, assistant U.S. Attorney Steve Skrocki asked Arnold about a specific document in Avery's 2006 bankruptcy case. It was a promissory note in which her husband agreed to pay Kane $2.6 million for his work on a contract.

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Her husband brought it to her and she notarized it, she said.

The date beside Avery's signatures and her own was Aug. 12, 2005.

Were those dates correct? Skrocki asked.

"No. They are a lie," Arnold said.

It actually was signed in August 2006, she said. That was just two months before Avery filed for bankruptcy. Prosecutors say it was backdated in an effort to swindle from the bankruptcy liquidation.

Did she sign it "willfully?" Skrocki asked.

No, she said.

Avery forced her to sign it, prosecutors said in a pretrial court filing. In his own sworn statement, which remains a secret document, Avery said he physically threatened her, the court filing said.

In the bankruptcy case, he at first lied about the document being backdated but a day later told the truth, the court filing said.

Avery's defense lawyer, Mike Dieni, fought to prevent prosecutors from bringing up those details as prejudicial, so Skrocki could only ask her about the backdating.

Arnold told jurors she and Avery met in California and moved to Alaska in 1996. Avery worked as a prosecutor for the city, then the state. For most of their Alaska years, they lived in a modest duplex on South Pine Street in the Russian Jack neighborhood of Anchorage, she said.

After his father died in 2001, Avery inherited his trustee's position. He left his state job and collected $600,000 a year in trustee fees. He started Regional Protective Services, to provide electronic and alcohol monitoring of defendants, Arnold said. He opened an office on C Street that also was home to his law practice. But the monitoring business wasn't making money, Arnold said. She knew of just one client.

The family moved to Eagle River, where Avery bought a big house on 10 acres. It "was like moving from the ghetto to the White House," Arnold said.

Did she remember first meeting Kane? Skrocki asked.

Arnold sighed. Yes, she said. Kane was the son of the real estate agent who sold them their Eagle River house.

Kane and Avery were always working together on some sort of new business, Arnold said. Kane was put on the business payroll as a consultant, she said. The men had lunch together and sometimes dinner. "They were pretty much joined at the hip," she said.

Kane, who both sides say exaggerated previous undercover work and intelligence connections, wanted to be called "Commander."

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Arnold said she refused. She found it obnoxious.

Then "the business kind of exploded," Arnold said. All of a sudden, cars and other big ticket items were being bought for various businesses, she said.

"What was it all for? Why was it needed? It was nonstop purchases, and huge purchases," Arnold told jurors.

Avery bought Security Aviation, executive jets and fighter jets. One of the pilots flew her over their Eagle River home and did a barrel-roll, a tough-guy joke to make the passenger throw up. Arnold said she didn't.

She remembers three trips in a Gulfstream corporate jet. One was when she went with Avery to the Bahamas to check on May Smith, the woman whose trust Avery was responsible for, the trust that prosecutors say he targeted in a con.

Another time the Averys and their children, along with Kane and his family, took the jet to Florida. The men went to a conference for a short while but mostly the families were at Disney World, she said.

Arnold prepared financial records for the bankruptcy proceedings and Skrocki walked her through key items. An Avery account, where his $150,000 quarterly trust fees were deposited, was $4,000 in the red as of the end of April 2005, Arnold said.

Then that June, sizeable deposits were made into the account: $638,000 on June 8, another $500,000 on June 21, Arnold said.

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That same month, Avery began paying off vehicle loans, mortgages and other debts, according to the accounting by Arnold. He bought two Honda four-wheelers and a trailer.

And the spending went on, she said. Avery bought personal watercraft, snowmachines, at least two large RVs, a yacht that become known as "Rob's boat" and a school bus-yellow Moose Boat, a more utilitarian vessel that was "Mark's boat," Arnold said.

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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