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Feds Say Lawyer Milked Widow’s Trust for $52M

ANCHORAGE, Alaska (CN) - A decade after allegedly burning through $52 million from an elderly widow's personal trust to pay debts and buy vintage warplanes, a yacht and more, the fraud trial of the widow's now-disbarred lawyer began Tuesday.

In opening comments Tuesday in Anchorage Federal Court, lawyers from each side offered their versions of how Mark Avery, a disbarred lawyer based in Anchorage and San Francisco, managed to spend millions of a trust he was supposed to protect in just six months.

"This case is about trust and betrayal of trust," Assistant U.S. Attorney Bryan Schroder said at the start of his opening statement to the jury. Avery and his defense team deny any fraud took place.

"He did not lie or cheat to obtain the money," Avery's attorney Mike Dieni told jurors when it was his turn. "Trustees wanted to invest in an air charter as a new way to make money and to use themselves."

The $52 million spent from May Wong Smith's personal trust, valued at $100 million in 2005 and set aside for her care, was approved by all three trustees - including Avery. Dieni said the trustees were allowed to conduct business with the personal trust along with the May and Stanley Smith Charitable Trust, valued at $350 million in 2005.

Both are California-based trusts.

The two sides pointed out that trustees were paid $600,000 a year to administer the trust, were allowed to bill the trust on top of that salary for "their special work" and collect commissions.

Both prosecution and defense agree that the original three trustees were friends with May Smith and her husband Stanley, who passed away in 1968. May Smith never remarried and started both trusts in 1982, one to care for her as she aged and the other to support charities that she and her husband believed in.

Mark Avery became a trustee only when his father Luther, an original trustee and noted San Francisco tax attorney serving as the trust's lawyer, died. The remaining two trustees, John P. Collins Jr. - an investment banker managing the trust's investments - and Dale Matheny, an accountant managing the books, were in their 70s and liked the idea of using an air charter to get around since flying commercial was more taxing in their old age, according to both sides.

Dieni further explained the evidence will show that Avery used trust money to buy assets - which the prosecution claims were luxury personal items - associated with the plans for the air charter service, or were paid for with Avery's own salary or money earned from his security businesses.

Avery's attorney also laid out an alternate version: hat it was not Avery who committed the fraud, but business partner Rob "Commander" Kane - someone with a long history as a "pathological liar" who duped Avery.

Schroder, however, told jurors that rather than allowing the trustees to use the assets to make more money for the trust, the trustees and charity as originally intended, Avery misused his position to cover personal debts and buy luxury items. He also mismanaged the air charter plan and then tried to cover it up, Schroder said.


He pointed out that the plan presented by Avery at a board meeting was to allow an acquaintance who owned an Alaska air taxi and ambulance to buy two or three aircraft, and work from there on the trust's new business investment. The only evidence of the plan was contained in one paragraph of the meeting minutes, the prosecuting attorney said.

"There is no business plan and no evidence [Avery] ever communicated the changes of plans," Schroder said, adding that Avery only notified trustees after he said the owner of the Alaska air charter was not a suitable partner and claimed to have bought the owner out. There was no mention to the trustees of Avery's other purchases and payments of personal debt, Schroder said.

Within three days of the very first transfer of $15 million on June 7, 2005 - first count of wire fraud - Avery had paid off his personal credit card debt, vehicle loans and bought new snow machines. The following week he transferred more funds from the Canadian account to his Alaska account to pay off a second mortgage, buy two $100,000 Class A motorhomes and a 43 foot yacht, prosecutors say.

Schroder laid out the extent of the crimes for which Avery now stands trial, which include several counts of wire fraud, bank fraud and money laundering. In less than one month, Avery had moved up to $35 million into his account and spent $1 million of it on personal debt and items, Schroder told the jurors.

Prosecutors say Avery moved more money the following month, this time to purchase two vintage war planes for $3.5 million. He gave one of the planes to his business partner, "Commander" Kane.

"Interesting that neither the partner Rob Kane nor Avery were licensed pilots," Schroder said.

The prosecutor pointed out that by January 2006, Avery had less than $2 million left and started laying off employees. On Feb. 2, the FBI showed up with search-and-seizure warrants after noticing how quickly the money had been coming and going from Avery's account.

Schroder finished his opening statement by describing Avery's actions in the aftermath of the FBI visit.

Instead of working with the FBI or the trustees, Schroder said Avery began getting rid of assets at "fire sale prices" - taking losses on all original purchases. There's no evidence the money went back to the trusts or to pay off the loan, but instead Avery hid the money in another attorney's account and declared bankruptcy, Schroder said.

"Evidence will show Mark Avery had every opportunity and he squandered that opportunity by conning the May Smith trustees into giving him access to a vast fortune, and betrayed that trust by the large amount he spent on himself," Schroder concluded.

Avery's attorney Dieni pointed out later in his remarks that his client did buy the air charter Security Aviation, an air taxi and ambulance service, two corporate jets and a fleet of Czech-built fighter jets - which Dieni said could have been used for military training.

Dieni told jurors that Avery and his partners were just closing in on securing federal contracts that would have returned the investment and made the company successful when the businesses collapsed due to the FBI raids and bad publicity.

The first day of trial concluded with the first prosecution witness.

Ruth Collins, one of the three current three trustees - and whose father and grandfather John P. Collins Jr. and Sr., respectively, were trustees before her - described the history of the trust, her family's participation and their friendship with the Smiths.

Stanley Smith was an Australian who met May Wong in Chongqing, China, after World War II. A Chinese national, May Wong studied economics at the University of St. Andrews in Scotland and worked as a translator while Stanley spent World War II behind Japanese lines working for the British Ministry of Information. They married in 1951, Collins said.

After the war, Stanley and a friend bought a dying newspaper in Japan - an inside track to becoming foreign traders there, according to Collins. He made most of his money mining iron ore in Malaysia and the couple lived in Hong Kong, Singapore, London and the Bahamas, Collins said.

Collins' position as trustee began in March 2006, after her grandfather passed away. May Smith also died in 2006.

Collins' testimony was set to resume Wednesday. The trial is expected to last three weeks.


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