Drug dealing at the highest levels has finally exposed the dirty hands in America that aid their “partners in crime” to control the dope trade here in the United States and overseas like no other while hiding behind Federal government regulations and protections, and now the lid of secrecy has finally been exposed for the world to see their illicit crimes.
Update: There are new developments in a Global Narcotics investigation in the story Secret Drug Operations previously reported here on Newsblaze. Those operations involved notorious drug organizations that paid millions to American-based Aircraft Title Companies to do their dirty work of purchasing and registering airplanes in the name of the Aircraft company. Their actions helped narcotic traffickers hide their true identity to make it safer for the drug smugglers to transport narcotics worth billions.
The widespread investigation finally resulted in several indictments against the owners and employees of Aircraft companies.
The indictments are part of an ongoing investigation.
Federal Global Narcotics Investigation
U.S. Federal authorities in the Eastern District of Texas (EDOT) recently indicted 8 people on multiple federal violations related to a deep, intertwined, complex international drug trafficking conspiracy, announced Acting U.S. Attorney Nicholas J. Ganjei. [Indictment announcement]
The charges are stunning.
All the players were high rollers in the dope game, and the defendants were also involved in a major Ponzi scheme involving millions.
Living the life of untouchable millionaires, the defendants used their clout and their federally regulated aircraft companies to act as brokers to first register and then sell or lease airplanes and luxury jets to discreet members of dope trafficking operations responsible for transporting illegal narcotics across the world, including into the United States.
On February 24, 2021, grand jury indictments were unsealed against Debra Lynn Mercer-Erwin, 58, owner of Aircraft Guaranty Corp.(AGC). Mercer-Erwin also owns Wright Brothers Aircraft Title(WBAT). She was arrested in Oklahoma on December 18, 2020, and the Feds transferred Mercer-Erwin to a jail facility in Texas.
The others indicted in the the big dope/money laundering scheme were:
- Mercer-Erwin’s daughter, Kayleigh Moffett, 33, also of Oklahoma City
- Federico Machado, 53, of Florida
- Carlos Villaurrutia, 40, of McAllen, Texas
- Four other unnamed individuals
Airplanes For Drug Running
Aircraft Guaranty Corporation website stated the company “controls over one billion in aircraft value, with over 2,000 airplanes registered in more than 160 different countries.”
The company also has nearly 1,500 airplanes in trusts in the United States, and Wright Brothers Aircraft Title is a full-service title and escrow company. Both companies are located in Oklahoma City, Oklahoma.
Over 11,000 aircraft are owned by trusts in the U.S.
The charges for the 8 defendants include:
- conspiracy to manufacture and distribute cocaine
- conspiracy to commit money laundering
- wire fraud
- export violations
- conspiracy to commit federal registration violations involving aircraft
The indictment painstakingly reveals how approximately $350 million in alleged criminal activity was inter-related to the drug trade. Investigation of evidence documented in the indictment describes how foreign governments seized United States-registered airplanes containing multi-ton shipments of cocaine and that the aircraft were held in trust by Aircraft Guaranty Corporation for the benefit of foreign corporations or individuals.
Federal agents identified Federico Machado, through his company South Aviation, and Carlos Villaurrutia, who used his companies Texton, TWA International, and Ford Electric, as aircraft sellers/brokers operating in the United States.
Since the 911 attacks on the United States and the World Trade Center in New York, the Federal Aviation Administration (FAA) only allows U.S. citizens to register aircraft, not foreigners. Yet it is legal for an American-based aircraft title company, corporation, LLC or law firm to legally register aircraft, even on behalf of foreigners, as long as the proper paperwork is filed with the federal government.
“The Threat posed by transnational crime cannot be overstated,” said Acting U.S. Attorney Nicholas J. Ganjei. “The use of United States-registered aircraft by these criminal organizations and their networks of associates poses a clear and present danger to the security of our nation. The American public can expect (Eastern District of Texas) to be relentless in its fight against the sometimes invisible, but always dangerous, threat of transnational organized crime.”
Behind the Scenes in Shadowy World
During these millennium times we live in, chit-chat about drug use and the illegal drug trade is at it’s highest. However, we rarely get the grand opportunity to see what really goes on behind the scenes of the shadowy world of the big fish and the Kingpins atop the throne in the world of drug smuggling. What we may see are the small-time street hustlers on the grind trying to make a few dimes in the dope game.
But if the Feds can prove beyond reasonable doubt these top American executives knowingly participated in the international narcotic trafficking trade, their lives and reputations will be unavoidably tarnished.
As mentioned, it is not illegal for Aircraft Guaranty to act as a trustee for foreign operatives but the indictment said defendants circumvented United States laws and regulations by assigning airplanes with the American tail# numbers beginning with the letter “N.” Tail numbers are located on the wings of an airplane that was provided to drug traffickers and prohibited foreigners. The tail# number of an airplane that starts with the letter “N” indicates it has American ownership and subject to less scrutiny than foreign based aircraft, due to American authority.
Interestingly, the Feds haven’t revealed the evidence showing exactly how the accused defendants knew in advance the airplanes would be used for transporting illegal narcotics.
Each charged individual faces penalties ranging from 10 years-to-life in federal prison on the drug conspiracy charges, and they also face an additional, up to 20 years in prison for money laundering, export and wire fraud violations.
Editor’s Note: Last year, in September 2020, journalist/investigator Clarence Walker wrote the expose Secret Drug Operations: Millions Paid to Exploit Aviation Rules – Cartels (Use) U.S. Airplanes to Transport Narcotics Into America
The Initial Investigation
Part one of this story documented the twisted and corrupt inner-workings of exported airplanes and Gulfstream jets registered by US-based aircraft title companies, corporations, and shell companies.
Those companies were subsequently used by drug cartels and their extended associates in Colombia, Venezuela, Ecuador, Belize, Honduras, Guatemala, and Mexico. The planes were used by trafficking networks to transport large quantities of cocaine and other assorted illegal narcotics into the United States and abroad.
The indictments against the accused allege that Aircraft Guaranty (abbreviated AGC) acted as trustee and registered “thousands” of airplanes on behalf of foreign owners (many were drug dealers). This in itself is legal under federal law. AGC can register airplanes, jets or helicopters, because the company is federally regulated to earn profits in the aircraft registration business.
According to federal investigator, from 2014 until December 2020, Mercer-Erwin and Moffett used their status as U.S. citizens involved in corporations to execute a scheme to further international drug trafficking. And, further, both Mercer-Erwin and Moffett registered airplanes allegedly intended for drug transport with U.S. Federal Aviation Administration while concealing the fact that certain aircraft were owned by foreign nationals and falsely claimed they would comply with all regulatory requirements.
The Federal government hit the players with a separate charge designated for Kingpins:
Evidence alleges the defendants manufactured and distributed cocaine with reasonable cause to believe the cocaine would be imported into the United States.
Investigators documented the number of airplanes registered by Aircraft Guaranty that had been shot down by Venezuela’s armed forces.
Venezuela is a primary country that serves as a transit point for drugs produced in neighboring Colombia. Airplanes are instrumental in transporting narcotics to North and Central America. National news media reported how Venezuela’s booming drug trade is so lucrative that traffickers periodically burn smuggling airplanes after using them once.
Members of major drug operations enjoy using American-based title trust companies that can legally sell/lease aircraft to their operation which allows them to hide their true identity due to the company registering an aircraft in the company’s name.
Homeland Security Investigators
Homeland Security Investigators (HSI) praised the work done to disrupt clever schemes by drug cartels to use American federally related entities to traffic dope.
“The indictments resulting from this highly complex investigation showcase HSI’s unique and far-reaching authorities, serving as an example of what the global law enforcement community can accomplish when we work together,” said Ryan L. Spradlin, Special Agent in Charge of HSI in Dallas. [DOJ Indictment announcement]
“We were able to deliver a significant blow to the transnational criminal organizations around the world by exposing a money-laundering and drug-trafficking scheme perpetuated by sophisticated drug cartels.”
The indictments also allege that illicit proceeds from the subsequent drug sales were then transported as bulk cash from the United States to Mexico and the cash was used to buy more aircraft and cocaine.
According to the criminal charges, airplane purchases were typically completed by wiring funds from Casa De Cambios and or banks in Mexico to shell corporations operating in the United States as aircraft sellers/brokers.
“As this case demonstrates, we will aggressively investigate the illegal exportation of aircraft contrary to U.S. national security interests,” stated Trey McClish, Special Agent in Charge of the U.S. Department of Commerce Bureau of Industry/Security and Office of Export Enforcement’s Dallas Field Office. McClish said the Export Enforcement “will leverage its unique criminal and administrative enforcement powers to detect and disrupt serious criminal schemes that violate U.S. export control law.” [DOJ Indictment announcement]
The Big FAA Problem
Federal Aircraft Registration Enables Narco Traffickers to Transport Drugs By Air
In recent years, critics forewarned about the widepread lax oversight at the Federal Aviation Administration. They warned that it is practically impossible to identify the foreign owner of an airplane that was involved in major crimes. Oversights and loopholes in registration can be exploited by dubious people because they can legally hire a company to act as their trustee and have the trustee register any purchased aircraft in the U.S. in the name of the trustee.
“It helps them hide, conceal their activities, and when they register their airplane with the U.S. flag, it’s like getting the U.S. stamp of approval,” said Boston Globe reporter Jaimi Dowdell. Dowdell and his colleague wrote the investigative series, “Secrets in the Sky.”
FAA Trusts Third Parties
The Federal Aviation Administration oversees the U.S. aircraft registry, maintaining information on approximately 300,000 aircraft. The problem with registration is that the FAA relies on different entities like shell corporations, aircraft title companies, trustees and law firms to provide the proper and correct registration for aircraft.
No FAA Verification
But bigger pitfalls lie within the Federal Aviation Administration because they don’t verify key information such as applicant identity or dig deep enough to uncover the layers of secrecy to know the true ownership of an aircraft.
In March 2020, U.S. Government Accountability Office(GAO) stated in their extensive recommendation report that the Federal Aviation “is limited in its’ ability to prevent fraud and abuse in aircraft registration.”
GAO Risk Assessment
GAO made 15 risk assessment recommendations to Federal Aviation Agents to show them how to better prevent, detect, and respond to fraud and abuse in aircraft registrations.
Federal Aviation Administration officials told CBS News three years ago they were, “constantly working to strengthen the integrity of registry information and developing a plan to significantly upgrade and modernize the aircraft registration process.”
Kingpin Brags About Aircraft Use
Kingpins in the narcotic trade often use aircraft to transport their products. Colombian Pablo Escobar perfected the logistics of hauling cocaine into America by using the best and most powerful aircraft built by mankind.
Another world renowned drug lord bragged about multiple airplanes that he owned.
“I supply more heroin, methamphetamines, cocaine and marijuana than anybody else in the world. I have a fleet of airplanes, submarines, trucks, and boats,” Joaquin “El Chapo” Guzman, the biggest and most known drug dealer in the world, told Rolling Stone Magazine in 2016.
Guzman’s incredible story was true.
Drug Planes Seized
For example, at one point, Mexico’s largest airline only owned 127 aircraft while Guzman owned hundreds and hundreds of planes including Boeing 747s. Eventually, Mexico authorities seized at least 500 narco-smuggling planes, many that belonged to Guzman.
U.S. authorities have seized aircraft belonging to Guzman as well.
Government records show that at least a quarter of the 100 airplanes or private jets seized by Drug Enforcement Administration(DEA) between 2013 and 2020 had been used for transporting narcotics by foreigners including American-based drug dealers. These same airplanes were registered by shell corporations in the United States which gave drug organizations, the purchaser of the planes, the privilege to hide their true identity.
Drug Plane Ownership
But here is the billion-dollar question: why so many drug smuggling airplanes or private jets that were seized over the years, yet these same aircraft were registered in the United States?
Who are the real owners of these planes carrying tons of dope?
To try answering these questions it is very important to know how easy aircraft can be secretly bought, sold and registered in America by drug organizations located overseas.
The Drug Enforcement Administration cautioned in its 2019 National Drug Threat Assessment that, with cocaine, “more and more, traffickers are utilizing private airplanes and secondary airports” that carry less security.
The DEA also warned that traffickers use personal planes to fly marijuana produced in states where it’s legal and transport the weed into states where it’s not.
Massachusetts Congressman Stephen Lynch has twice in (2017 & 2019) introduced a bi-partisan bill called the Aircraft Ownership Transparency Act to address loopholes in Federal Aviation Administration regulations by reducing the cloak of protection and secrecy surrounding aircraft registration.
“Without beneficial ownership information for aircraft registration, the Federal Aviation Administration(FAA) may be registering aircraft that do not meet its own requirements. We need increased transparency in aircraft registration, as well as improved accountability from the FAA, to prevent fraud, corruption, or illicit activity by bad actors,” Lynch said.
“Purchasing luxury items like aircraft and other high-end vehicles, using anonymous companies is a time-tested strategy used by the corrupt and the criminal to move and launder their ill-gotten gains without being detected,” said Mark Hayes, Anti-Money Laundering Campaign Director for Global Witness. “Legislation such as this that shines a light on sectors prone to significant risk can help fill in critical gaps in transparency in the meantime,” Hayes concluded.
For example, Millionaire Robert Carlson, a California businessman, known by federal narcotic agents as the “Cocaine King of the Skies,” once lived in an $8 million mansion, and hobnobbed with A-list Hollywood celebrities. Carlson used private jets undetected for several years to haul narcotics worth billions through smaller airports across the country for Mexico’s notorious Sinaloa Cartel. Carlson was sentenced to 16 years and 8 months in prison in 2018.
Federal Prosecutor Speaks
Texas Eastern District Assistant Federal Prosecutor Ernesto Gonzalez, said the criminal investigation into the widespread probe of questionable airplanes registered by Aircraft Guaranty and later used for drug trafficking began when WFAA-TV in Dallas, started their own investigation of Aircraft Guaranty Corporation.
“That’s where the interest started,” Gonzalez told WFAA about their reporting on all these planes in Onalaska.
WFAA reported the discovery of over 1,000 registered aircrafts in Onalaska – a Texas town without a single airport, and with only approximately 3,000 citizens. A trail of mystery hung over the ongoing investigation when investigators discovered “hundreds of airplanes” registered to only (two) P.O. boxes in Onalaska. All these airplanes in the sleepy, East Texas town were owned by people living in foreign countries.
Two years ago, Aircraft Guaranty Corporation owner Debra Lynn Mercer-Erwin, disagreed with critics over the way registration of aircraft is done. “I would find it very difficult for a criminal or drug user to place their aircraft in trust, and why would they?” Mercer-Erwin asked the WFAA reporter, rhetorically. She continued, “We know who our clients are. We collect all the information.”
Mercer-Erwin insisted to reporters that her company thoroughly vetted foreign owners to ensure their legitimacy prior to registering them under the company’s trust. Federal prosecutor Gonzalez disputed what Mercer-Erwin previously told TV reporters.
“They(AGC) weren’t doing any vetting at all, and some of the planes were placed in the hands of drug traffickers,” Gonzalez stated. “And she (Mercer-Erwin) knew that as well because of the number of planes that got seized.”
Gonzalez said after his investigative team began probing Mercer-Erwin’s company, his office was contacted by Homeland Security Investigation agents in Brownsville Texas about a case they were working on. “Basically, what they investigated and found was that American Guaranty Corporation or AGC had lots of planes over the years involved in seizures involving large quantities of drugs.”
In an unexpected twist related to the flow of illegal money, federal authorities discovered, to their amazement, that aircraft title company owners and their associates managed to pull off a Ponzi scheme that’ll boggle the imagination a thousand times.
The scheme totaled at least $350 million and perhaps up to $560 million dollars, according to East Texas District Assistant Federal Prosecutor Ernesto Gonzalez. The federal indictment alleges that investors were duped into putting up money to buy airplanes. Investors were required to put money into escrow accounts at Wright Brothers Aircraft Title Company, a company owned by Mercer-Erwin. Mercer-Erwin’s daughter Kayleigh Moffett worked at Wright Brothers.
In the Ponzi scheme only Mercer-Erwin, her daughter Kayleigh Moffett and Federico Machado were indicted. All three were charged with engaging in a fraud scheme related to the acquisition of aircraft. Federal investigation showed Machado recruited investors to invest in aircraft deposits for sales transactions that never took place.
Investors allegedly placed their money in an escrow account held by Wright Brothers Title Company owned and managed by Mercer-Erwin and Moffett. Machado would then use these funds for purposes other than the purchase of aircraft.
“The money was supposed to be deposited in the escrow account, stay in the escrow account until the transaction went through,” Gonzalez said. Gonzalez further told WFAA-TV reporters that investors were promised a substantial return for a short period of time, at least six months. Just as the saying goes, there’s no honor among thieves, Mercer-Erwin, Machado and Moffett diverted the money to enrich themselves.
Investigators allege the investors were putting the money up for either planes that didn’t exist, or belonged to someone else or the planes weren’t for sale, Gonzalez said. Several of the planes were ‘unsellable’ and located in distant locations like Japan, India and China.
Investigators tracked down millions of dollars wired to co-defendant Federico Machado who invested a substantial amount into a mineral mine in Guatemala.
Gonzalez went deeper. “These were ghost planes that no one bothered to investigate to see whether those planes were actually being sold.”
“They continued to do more plane deals to cover up the previous plane deals, which is your typical Ponzi scheme,” Gonzalez, said.
Additional Indictment Information
Indictments filed against Aircraft Guaranty Corporation owner Debra Mercer-Erwin and her co-defendants showed different airplanes registered by Mercer-Erwin’s company were linked directly to drug trafficking. The indictment cites 22 alleged “offending aircraft transactions,” many of which involved drug trafficking by aircraft registered with the defendant’s trust company, Aircraft Guaranty Corporation(AGC).
According to the indictment, on February 27, 2020, Belize authorities seized a plane hauling 2,310 kilos of cocaine. The seizure was the largest seizure of cocaine in Belize history, news media outlets reported. A trail of evidence showed the plane registered to AGC – and put into trust by a convicted drug smuggler, the indictment alleged.
Prosecutor Gonzalez said that if AGC had done a simple Google search they would’ve discovered the person who registered the airplane “was a drug trafficker.”
The indictment explains how Mercer-Erwin’s AGC company tried to conceal the activity of the airplane:
Moffett filed a bill of sale and transferred the ownership back to the actual owner “despite the fact the aircraft was in government custody in Belize.”
“So we would use that as an indicator of knowledge on her (Mercer-Erwin’s) part and that’s why they took the steps they did that they would deregister and try to distance themselves as much as possible,” Prosecutor Gonzalez said.
Indictment Additional Information
- On or about October 5, 2012, Airplane tail-number# N305AG was registered to Aircraft Guaranty Corporation. That same day, a Declaration of International Operation was filed by Aircraft Guaranty for the aforementioned aircraft vessel. Then, on or about September 11, 2018, Kayleigh Mofffett filed an Federal Aviation Administration (FAA) registration renewal.
- On January 27, 2020, the same airplane with tail-number#N305AG was seized in Guatemala hauling approximately 1,700 kilos of cocaine. The plane was taken into Guatemalan custody. Suspicious transactions pertaining to this particular plane accumulated more paperwork when on January 31, 2020, Kayleigh Moffett transferred ownership of the airplane to Arrendadora SA de CV, a foreign company. Aircraft Guaranty owner Mercer-Erwin nor her employees did not make any export filings for this transaction as required by law.
- On or about December 9, 2018, an Aircraft Guaranty registered airplane crashed in Venezuela while delivering 1,200 kilos of cocaine for Mexico’s Sinaloa Cartel.
- On March 10, 2019, an Aircraft Guaranty registered airplane also crashed with 1,215 kilos of cocaine in Mexico, killing a pilot. Mercer-Erwin claimed “the crashed aircraft falsely displayed the N18BA tail-#number.” Mercer-Erwin said the tail number belonged to a different aircraft registered by Aircraft Guaranty.
- The indictment highlights Aircraft Guaranty’s “attempts to shirk its responsibilities by delegating regulation obligations to the foreign national.” Federal Aviation Administration has repeatedly pointed out, that, the lessee, in this case, AGC(Aircraft Guaranty) “is responsible for operating aircraft in accordance and compliance with all laws, ordinances, and regulations relating to the possession, use, operation, or maintenance of the aircraft, including but not limited to Federal Aviation Regulations.” Federal Aviation further noted: “Lessee warrants it will not use the aircraft for an illegal purpose.”
Who Are the Real Drug Pushers in America?
Tracking U.S. Registered Airplanes Transporting Dope
Who are the real drug pushers in America? Historical evidence clearly shows that the rich corrupt bigwigs, top level executives and their associates with authority to make it happen. Young men selling crack, a pill “or grams or ounces of narcotics” in the inner-cities of America don’t have an iota of access to sell or lease airplanes, then register a plane to ensure it has a U.S. tail-number to give it less scrutiny while transporting major loads of drugs.
Investigative research by Clarence Walker, which includes an extensive review of corporate filings, aircraft registration databases, ownership documents and social media posts illustrates how in one country, Venezuela, armed forces destroyed approximately 21 airplanes beginning in 2019. Of those destroyed, 12 of the aircraft were registered in the good old United States.
News media outlets reported 8 of these 12 U.S. registered aircraft were involved in the drug trade, with four others shot down for failure to properly file a flight plan. Total amount of drugs discovered onboard these airplanes separately was worth “hundreds of millions of dollars.”
Here is a link to a database identifying each U.S. based registered airplane seized by the Venezuelan government with narcotics aboard. Zoom it down to 75 percent to view ownership of the identified narco-planes. Unsurprisingly, Aircraft Guaranty Corporation are among those listed.
Based in Dallas, Texas, Aviation attorney Ladd Sanger told WFAA he was troubled by Aircraft Guaranty Corporation and the ability to use registered trusts to shield true ownership of aircraft under Federal Aviation Administration laws. “I knew that there were shady things going on with Aircraft Guaranty,” Sanger said when told about the indictments.
Sanger represented families of three of the five people killed in a 2013 helicopter crash in Mexico. The helicopter was registered in a trust to Aircraft Guaranty. Attorney Sanger never discovered who owned the helicopter. A U.S. Court levied a $15 million judgement against the Mexican company that operated the helicopter.
Aircraft Guaranty didn’t have to pay the judgement because its company wasn’t the real owner of the helicopter, leaving the victim families without recourse to make anyone pay for the death of their loved ones.
“The way these trusts are being used,” Sanger pointed out, “it’s an avoidance to all of the different enforcement and responsibility aspects of aviation.”
Prosecutor Gonzalez said the federal investigation points to a need to reform the way foreign-owned planes are registered.
“I can’t propose legislation, I can only enforce the laws,” Gonzalez told WFAA.
(Editor’s Note: U.S. Legislation that requires the disclosure of ownership and identity of foreign person or foreign corporations using aircraft registration has already been proposed but the much needed bill did not receive a vote in January 2019).
Each defendant charged in this widespread drug conspiracy, money laundering and Ponzi scheme investigation has not been convicted and they are presumed innocent until convicted in a court of law.
Retired Homeland Security Investigation Agent Kenneth Martinson, sums up the importation of narcotics by airplane by saying, “The next time you look up and see one, wonder to yourself: ‘Where’s it going? Where’d it come from, and what’s on board?”’
Investigative Journalist Clarence Walker, writes regularly about crime, criminal justice topics, legal issues, and drug cartel operations such as this global narcotics investigation. He can be reached at: [email protected]
Sources and quotes used in this story: WFAA-TV, Justice.Gov, CBS News and Government Accountability Office.