Anchorage Daily News

Anchorage lawyer Mark Avery is being accused in a California lawsuit of raiding the trust fund of a wealthy widow for more than $50 million to finance the mysterious, rapid growth of Security Aviation Inc. and his other business enterprises last year.

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Documents in the new case, filed last week in San Francisco, suggest answers to lingering questions about how Avery, a former city and state prosecutor who lived in a Russian Jack duplex as late as 2004, managed a wild spending spree last year. In just a few months, he acquired the Anchorage air charter company and started other businesses, then stocked them with transcontinental jets, surplus Warsaw Pact military aircraft, helicopters, a house, a yacht, a fleet of SUVs and at least one vintage World War II plane.

Avery was one of three trustees for the May Smith Trust but on Wednesday, a San Francisco judge hearing the lawsuit suspended Avery's powers and ordered him not to sell any property acquired through the trust.

The new court case, filed July 27 in San Francisco Superior Court, also revealed that May Smith died July 15 of old age and complications from Alzheimer's disease eight days after proceedings began in the Bahamas to have a guardian appointed for her. May Smith had been in the Bahamas under the care of two former law enforcement officers from Anchorage hired by Avery.

One petition brought by attorneys for the other two trustees sought to have Avery immediately suspended as trustee, which was the action ruled upon Wednesday. A second petition, seeking to have Avery permanently stripped of his role as trustee and the return of the $52 million, is set for a Sept. 26 hearing.

Avery and Security Aviation first made headlines in Anchorage on Feb. 2, when federal agents staged armed raids on the company headquarters on C Street and hangars in Anchorage and Palmer. The same day, Avery's second in command, Rob Kane, was arrested on federal weapons charges, accused of possessing illegal rocket launchers for the military aircraft. Kane and Security Aviation were acquitted by a federal jury May 26.

The new court filings in California are part of a civil probate case related to administration of the trust. Avery has not been charged with any crimes related to the spending spree.

But the criminal investigation into Avery and his finances continues, acting U.S. Attorney Deborah Smith said Wednesday. She declined to comment further.

Avery did not return a telephone call Wednesday but in the past has insisted he did nothing wrong and that his money came from legitimate sources.

"I have done nothing wrong," he wrote in a June 8 e-mail to the other two trustees for the May Smith Trust that was filed in court. "I do not know what sorts of lies the government or other people have been telling you."

Federal agents had previously suspected Avery's money came from a related trust, the May and Stanley Smith Charitable Trust, which had assets of nearly $360 million as of the end of 2004.

Both trusts had the same three trustees. But the new court documents assert only that Avery borrowed against May Smith's personal trust, not the bigger fund that mainly provided small grants to schools and other educational programs. Avery inherited his seat on the trusts in December 2001 after the death of his father, celebrated San Francisco tax and estate attorney Luther Avery.

In an interview before the trial, Avery said his money came from "a business relationship that is not described as a loan and beyond that I am not going to tell you because I would be helping the government." The business relationship was "to provide services for Mrs. Smith and the trusts," Avery said.

May Wong Smith was the widow of Stanley Smith, an Australian war correspondent and orchid collector who became rich by mining in Malaysia, according to a 2003 San Jose Mercury News story. British newspapers have called him an "Australian property tycoon" and the Sydney Morning Herald in 1960 said he was a shipping millionaire then living in Hong Kong who "amassed a fortune in the Far East soon after the war." He died in 1982.

That same year, the May Smith Trust was established to provide for May, manage her assets and provide for some charitable giving. She created the separate charitable trust in 1989.

Trust documents filed in court with the petitions didn't reveal what is supposed to happen to the May Smith Trust upon her death.

The Smiths didn't have a big family. Their daughter, Countess Barbara de Brye, died in 1991. She became a countess in her second marriage and inherited a fortune from Stanley, leaving most of it to her son, Alexander de Brye. He was a 17-year-old schoolboy when he became one of the richest young people in Britain, according to news reports at the time. He owns a small California vineyard and shuns publicity.

The other two trustees, N. Dale Matheny and John P. Collins Jr., assert in court petitions that Avery misled them about the use of the money.

In early 2005, Avery, Kane and an Anchorage arms dealer and a paramedic named Dennis Hopper chartered a private jet to Britain, where they picked up May Smith to move her to the Bahamas, an FBI agent said in a sworn statement filed in connection with the criminal case in Anchorage.

The new lawsuit picks up the story several months later, when, on May 11, 2005, Avery and the other Smith trustees met in San Francisco. Avery presented a proposal that he said would ensure May Smith's safety by providing reliable transportation away from the Bahamas if she had a medical emergency or needed to escape a hurricane, according to court documents in the probate case.

Avery suggested pledging Smith's assets to finance the purchase of two or three long-range aircraft by an Anchorage company, World Air Inc., owned by businessman Doug Gilliland. Avery said the jets could be used for charters as well as by Smith and the trustees, the California lawsuit said. Matheny and Collins agreed to allow $50 million in U.S. bonds from the trust to be used as collateral for the proposal. The court documents don't explain why the trustees thought up to three intercontinental jets were necessary.

Avery also acted as the trust's legal adviser for the deal, the petitions said.

Starting June 7, 2005, Avery began a series of transactions through accounts he controlled. By July 18, 2005, more than $43 million had landed in the account of one of his companies, Regional Protective Services, according to the suit.

But instead of a deal with World Air, as Avery promised, he purchased Security Aviation in his own name, the lawsuit charged.

Still, with Avery promising that RPS would make "a significant principal repayment" before the end of the year, Matheny and Collins approved two more wire transfers totaling $8.4 million. It all was supposed to be repaid by March 31.

Instead, Avery used the money for his own "self-interest," the lawsuit said. Even now, the lawsuit charged, Avery is trying to sell a Gulfstream jet -- not to repay the loan but to buy Learjets and a newer model Gulfstream for his business enterprise, according to a court filing.

"Avery's breach of his duty to the May Smith Trust could not be more serious," the petition asserted. "He has refused to acknowledge the impropriety of his conduct, to account for the funds he has taken, to pay back the trust funds, or even to discuss a plan for repayment."

One of the San Francisco lawyers who filed the petitions, Louise Ma, declined to answer questions about the matter when reached Wednesday afternoon.

In Wednesday's court order, presiding Probate Judge John Dearman also prohibited Avery and all of his companies including Security Aviation, Regional Protective Services, High Security Aviation, and Avery & Associates, from selling or disposing of any property acquired through the trust.

Daily News reporter Lisa Demer can be reached at ldemer@adn.com and 257-4390.