A trial has begun in Sherman, Texas, for an Oklahoma City-based aircraft title company accused of defrauding investors of nearly $350 million in an alleged Ponzi scheme.
In 2019, aviation trust company Wright Brothers Aircraft Title (WBAT) operated out of an East Texas town called Onalaska, registering over a thousand planes there.
Federal prosecutors allege that the owner and president of WBAT had purposely facilitated a scheme to defraud investors worth millions in escrow fees, according to court testimony reported by WFAA.
Prosecutors claim that Debra Lynn Mercer-Erwin kept $4.9 million from investors, and her co-conspirator, Federico Machado, pocketed $75 million from investors over four years. This follows a 2021 federal indictment alleging Mercer-Erwin helped a non-U.S. citizen purchase an aircraft and then register it in the U.S.
“This is a crime of greed,” federal prosecutor Heather Rattan said in her opening statement, per WFFA reporting. Mercer-Erwin was motivated by money, Rattan suggested, which led to her turning a blind eye to the victims of her Ponzi scheme.
Deloitte forensic accountant Grace Howe testified that Mercer-Erwin and Machado would use investor deposits to secure private aircraft ownership to pay off investors from previous plane deals instead.
At the same time, Mercer-Erwin and Machado allegedly collected hefty escrow fees from customers without properly storing funds in the designated escrow account. Bank records, phone records, and the ledger of plane sales apparently revealed this information.
Under the signed contract agreement, customer funds were supposed to be held in an escrow account on behalf of the investors while Machado worked on acquiring the aircraft. However, the alleged lack of letters of intent, bills of sale, or other records suggest these transactions never occurred.
Mercer-Erwin’s alleged role in the suspected Ponzi scheme was the most significant due to her complete control over the money, Homeland Security Special Agent Justin Marshall claimed during the court hearing.
“As soon as the money came in, it was sent out to pay other investors,” he said, noting that the aircraft in the scheme reportedly either never existed or weren’t actually for sale, according to WFAA.
However, Mercer-Erwin contends that Machado misled her into handling payments connected to the alleged Ponzi scheme. She claims that she had followed her lawyers’ legal advice and was not responsible for the planes, some of which ended up in the hands of drug dealers, WFAA reported.
“When she found out about those planes with drugs on board, she terminated the trust and operating agreement,” her lawyer, Joe E. White Jr., claimed, per WFAA.
In all, investigators concluded that 30% of WBAT’s business was dedicated to maintaining the scheme, which collected $750 million in capital inflows from investors. According to Howe, the scheme reportedly resulted in more than $240 million in investor losses.