Crime & Courts

Man accused of massive fraud says he never lied to get widow's money

Mark Avery on Tuesday told jurors that he never lied, cheated or deceived anyone to get access to a wealthy, incapacitated widow's trust, but that in the end -- in less than six months -- $52 million was spent and he didn't repay it.

Avery, in his second day on the witness stand in an Anchorage courtroom, gave rambling answers to his lawyer's questions as he tried to portray himself as an aviation entrepreneur who was taken advantage of by the savvier and better-connected undercover operative Rob Kane, his former top man.

"I feel stupid and a bit of a sucker," Avery told jurors.

Kane testified for the prosecution earlier in the U.S. District Court trial that Avery was in charge, not him. Kane's role is pivotal, yet he is a "habitual fabricator" who exaggerates his exploits and connections, both sides have agreed.

Avery's voice grew hoarse over one and a half days of testimony. But he seemed compelled to tell the backstory of his spectacular rise and fall, which Anchorage residents first got a glimpse of in 2006 when the FBI raided his home and businesses, including Security Aviation. Kane and Security Aviation were tried and acquitted a decade ago on charges of possessing illegal rocket launchers but investigators all along were looking for evidence of financial crimes, according to prosecutors.

Avery is accused of wire fraud, money laundering and bank fraud for what federal prosecutors call a $52 million fraud. The money came from a loan backed by the May Smith Trust, then worth $100 million and set up to provide for the care of May Wong Smith, who was elderly, suffering from dementia and unable to speak or take care of herself in 2005, when the money was spent. She died the next year in the Bahamas. Her late husband, Stanley Smith, made a fortune after World War II mining in Malaysia. A separate charitable trust in both of their names was worth $350 million.

Avery, one of three trustees for both Smith trusts, said that while he signed for wire transfers of the loan money, Kane was making many of the financial decisions.

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One of his businesses, Regional Protective Services, was supposed to repay the loan, he said.

"But I personally felt responsible," he told jurors Tuesday during questioning by his lawyer, Mike Dieni.

The defense and the prosecution have walked witnesses through a timeline of financial records, emails and bare-bones minutes from May Smith Trust meetings. Both of Avery's fellow trustees, Dale Matheny and John Collins Jr., who were in their 70s at the time, have since died.

Was Avery acting with the full approval and authority of the other trustees as the money was spent, as he claims?

Or did he step far outside the bounds of the arrangement approved at a May 11, 2005, trust meeting, as the prosecution contends?

What was the original purpose of the loan? Dieni asked.

To provide air services for the trusts and the trustees, Avery answered. Recipients of grants from the charitable trust, for instance, were in various countries and needed to be checked on.

How does he characterize the loan?

"It was an investment," Avery said.

But before Avery borrowed against it, the May Smith Trust was invested in safe U.S. treasuries, jurors heard earlier in the trial.

Under the plan pitched to trustees, Avery was going to work through established aviation operator Doug Gilliland to buy, sell and operate planes. Gilliland already had a valuable contract with the Yukon-Kuskokwim Health Corp. for medevac services.

But Avery told jurors that Kane convinced him that Gilliland was problematic. He bought air charter Security Aviation so they could operate on their own.

Did he alert the other trustees he was buying his own aviation company, a big change in course? asked Assistant U.S. Attorney Steve Skrocki.

Avery said he didn't remember.

Avery told jurors that he bought RVs to serve as mobile command centers for his electronic prisoner-monitoring business. He bought a yacht because Kane wanted one but also hoped to put it to use for high-end customers. A patrol Moose Boat to accompany it could have been mounted with a .50-caliber gun as well as smaller ones, he said.

Avery testified that Kane -- who earlier admitted that he lied about having his own money -- said he was going to buy Avery a World War II vintage P-51 Mustang but the trust-backed loan ultimately paid for it.

In hindsight, was that wise? Dieni asked him.

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Avery said he wasn't sure. Everyone at Security Aviation thought the plane -- which never made it to Alaska -- was cool, he said. It was "pilot candy," he said. But yeah, he said, it was "stupid."

What about the even more valuable F4U Corsair? Dieni asked.

Kane really wanted a Corsair and was going to buy one in disrepair if left to his own path, Avery said. So Avery bought a $2.4 million museum-quality Corsair, he told jurors.

What about paying off debts such as car loans and a mortgage with the money? Avery said Kane advised him they needed to start out debt-free.

Collins, one of the other trustees, drove his own RV to Alaska for a surprise visit in the summer of 2005 to check out what Avery was up to.

Skrocki, during his cross examination, asked Avery whether Collins knew about the Mustang and the Corsair, the yacht and the Moose Boat.

Avery said he wasn't sure. He didn't remember telling him.

As to a backdated $2.6 million promissory note to Kane, which jurors heard about earlier in the trial, Avery said Kane knew investors who might be able to save Security Aviation in 2006, after the FBI raids, but Kane told him they would only step up if he had an ownership interest.

Avery's testimony continues Wednesday, the trial's 12th day. Closing arguments may take place in the afternoon.

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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