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Law firm Vedder Price has created a task force to assist clients impacted by the indictment involving Aircraft Guaranty Corporation (AGC) and Wright Brothers Aircraft Title, Inc. (WBAT).
Federal prosecutors have accused the owner of both AGC and WBAT, Debbie Mercer-Erwin, her daughter Kayleigh Moffett and six other individuals outside the company of seven different charges.
Various defendants are accused of running a complex $350m Ponzi scheme, helping drug traffickers deregister and change aircraft ownership records, failing to register aircraft exports and participating is a series of fake aircraft transactions. (Ponzi schemes lure investors to make investments and pay profits to earlier investors with funds from more recent investors).
The Task Force will be led by David M. Hernandez, shareholder and Global Transportation Finance practice group member, Vedder Price P.C.
The indictment allegations have very serious consequences to AGC and WBAT customers, according to Vedder Price. Both companies have been effectively shut down by order of the court.
The US government is seeking $350m in restitution, which may impact escrow clients’ access to their seized funds. AGC clients who based their aircraft overseas without properly exporting the aircraft may face civil or criminal penalties and/or aircraft seizure.
Federal authorities have already seized 12 aircraft in relation to the recent indictment. Any aircraft in a trust or guarantee found in the US without proper exportation documentation may be seized in accordance with the US law (15 CFR subpart H), according to Hernandez.
All AGC and WBAT aircraft transactions, trust transfers and financing matters are now subject to prior government approval. Lastly, non-US citizens will not be able to maintain their aircraft on the US registry if their trust is dissolved.
The primary purpose of the task force is to identify clients’ risks, explain to them their options and implement solutions through conversations with the various authorities.
Hernandez told Corporate Jet Investor: “If your aircraft is seized, there are three agencies to work with: the US Attorney’s office, the office of Export Enforcement and the Department of Commerce. It requires a multi-faceted approach. And the best way to handle that is through a task force.”
Vedder Price has been assisting clients on matters including funds recovery, aircraft transactions and trust transfers since the government seized the accounts of WBAT and AGC in December.
Hernandez said improper export of aircraft is “the coronavirus of the aviation industry, and there is no vaccine.”
The seven-count indictment alleges, among other things, that specific defendants:
1. Were involved in a complex $350m Ponzi scheme that “took advantage of the typical aircraft purchase transaction to dupe investors into depositing money in the WBAT escrow account”
2. Conspired to commit aircraft export violations by failing to export aircraft in trusts as required in accordance with the export regulations
3. Conspired to commit aircraft registration violations by creating aircraft trusts contrary to Federal Aviation Administration (FAA) guidance and filing documents with the FAA that were allegedly false or misleading in violation of FAA regulations.
However, the US Attorney’s Office, Eastern District of Texas has highlighted that all the defendants remain innocent until proven guilty.
Neither the Office of Inspector General, US Department of Transport nor the owner of AGC and WBAT was available to respond to Corporate Jet Investor’s questions about the allegations. Read more about the indictment here.
Meanwhile, the full implications of the case for business aviation will be the subject of a special Town Hall online meeting on Friday March 5th. Please register to attend the hour-long event here.