At the start, before Mark Avery's spectacular fall from his Anchorage aviation empire, he was working with a medevac operator and pilot who had extensive experience, a contract with a major rural Alaska health care provider and connections for buying and selling planes.
That operator and pilot, Doug Gilliland, testified for the prosecution on Wednesday as the federal fraud case against Avery reached its third day. Avery is accused of spending $52 million through a loan backed by an elderly widow's trust to buy and build aviation and security operations – as well as expensive RVs and SUVs, boats and vintage warplanes. He says he did so with the approval of his fellow trustees.
Prosecutors contend he misled the trustees, with Gilliland's credentials as a main prop, only for the promised business arrangement to end almost as soon as it started. Avery's defense lawyer on Wednesday flagged flaws in Gilliland's record in an effort to convince jurors that Avery abandoned him for good reason.
Gilliland, who lives in St. Louis, Missouri, told jurors that he began working in Alaska in 2003 when one of his businesses got a contract to operate medevac flights for the Yukon-Kuskokwim Health Corp., which runs the hospital in Bethel and clinics that serve more than 50 villages in the region. He also operated medical flights in the Lower 48.
A flight medic, Dennis Hopper, told him he knew of some people who wanted to get into the business of long-range medevacs. Hopper introduced him to Avery, who brought along Rob Kane, a larger-than-life character who was Avery's right-hand man.
"I didn't quite understand what Mr. Avery was doing," Gilliland told jurors. Avery had no background in aviation but wanted to get into a very challenging business, Gilliland said during questioning by assistant U.S. Attorney Steve Skrocki.
"I tried to tell them this is very expensive, what they are undertaking, and very few people in this world are able to do that," Gilliland said.
Gilliland, who at that point had 37 years' experience, said running a medevac charter first requires a Federal Aviation Administration certificate. Gilliland said he talked to them about operations and about buying and selling airplanes. He believes in quickly shedding planes that aren't generating income, since they are such expensive inventory.
By the spring of 2005, Avery was building up Gilliland to his fellow two trustees on the May Smith Trust board. The trustees were supposed to guard what was then a $100 million trust set up to care for Smith, who was old, frail and suffering from dementia, other witnesses said.
In a May 9, 2005, email to trustees John P. Collins Jr. and Dale Matheny – both of whom have since died – Avery laid out a plan to use the May Smith Trust as collateral for a loan that could be used to buy two or three executive jets capable of flying to the Bahamas, where Avery had moved May Smith earlier in the year. Gilliland would help secure the planes. Avery attached to the email a detailed proposal that appeared to be from Gilliland's World Air Inc. for a military contract as evidence of Gilliland's credentials.
"Mr. Gilliland authorized me to send to you the attachment to this e-mail," Avery said in the email. "This is a confidential document that you should destroy after viewing. It is intended to give you an idea of his capabilities."
When prosecutor Skrocki showed Gilliland the proposal Wednesday, he said he had no memory of it and doesn't believe he would have written it.
"I don't do letters very good," Gilliland said.
Still, the folksy Gilliland, who is 73, said he has health issues including brain trauma that left him with some memory loss.
Just two days after Avery's email, the May Smith Trust board was reconvening in San Francisco, where its office was. Gilliland offered Avery a ride to California on one of his Learjets.
At that meeting on May 11, 2005, Gilliland and others talked to the board about Avery's idea, according to board minutes. And Avery got approval. Gilliland said he only remembers answering a few questions.
But didn't he tell government agents that he gave a combination of "an excellent sales pitch and the truth?" Mike Dieni, Avery's defense lawyer, asked him. Gilliland said he didn't remember that.
He said there was little discussion about the $50 million. He described the figure as "kind of a shock to your system."
After that meeting, Gilliland told jurors, he met a few times with Avery and Kane, but found the latter – who played up past intelligence connections – nervous and hard to get a read on.
"He was worried about somebody coming around the corner at him," Gilliland said.
He said he arranged for Avery to buy two used Gulfstream executive jets for good prices, and also a small air charter based in Reno that had an FAA certificate. He also talked to the owner of air charter Security Aviation about a possible purchase and told Avery he could buy it for $6 million. But days later, he said, Avery ended up paying $8 million.
Then Avery told him he wanted to buy his contract with the Yukon-Kuskokwim Health Corp., his main business in Alaska.
"I was flabbergasted," Gilliland said. He felt he was being pushed out by a new operator. But he had heart problems and other health issues. He missed his family in Missouri. Operating in rural Alaska was more expensive than he thought. He said he sold the contract to Avery for $1.1 million.
Dieni, the defense lawyer, suggested to jurors that Avery may have had good reason to shed Gilliland. He asked Gilliland about a Federal Aviation Administration case against his American Air Network Inc. The initial decision by an administrative law judge came down in July 2005 and found numerous violations of airplane maintenance and inspection requirements. The judge proposed a $49,000 fine.
Skrocki, the prosecutor, had fought to keep the information from jurors. He told U.S. District Judge Ralph Beistline that he had just gotten the document and it wasn't based on events in Alaska. Plus, it wasn't a final order, Skrocki noted.
Beistline allowed Dieni to question Gilliland about it. Gilliland was dismissive and said the troubles began with "an FAA man in Texas" who had a beef with the operation. He said he gave up his certificate to operate later in 2005, but had a second certificate. He now is retired.
The trial continues Thursday and is expected to last three weeks.