Vedder Price Forms Task Force to Assist Clients Impacted by AGC/WBAT Indictment

Vedder Price created a task force to assist clients impacted by the indictment involving Aircraft Guaranty Corporation (AGC) and Wright Brothers Aircraft Title (WBAT) filed by the United States Attorney’s Office for the Eastern District of Texas on Feb. 24, 2021. David M. Hernandez, a shareholder in Vedder Price’s Washington, D.C. office, will lead the task force.

AGC has nearly 1,500 aircraft in trusts in the United States and WBAT is a title and escrow company. Both companies are owned by Debbie Mercer-Erwin and are located in Oklahoma City, OK.

The seven-count indictment alleges, among other things, that:

  • Specific defendants were involved in a complex $350 million Ponzi scheme that “took advantage of the typical aircraft purchase transaction to dupe investors into depositing money in the WBAT escrow account;” however, the funds were not used for aircraft transactions, and, instead, the defendants diverted the money for their own uses, including a mineral mine in Guatemala, according to the indictment and the lead assistant U.S. attorney.
  • Specific defendants conspired to commit aircraft export violations by failing to export aircraft in trusts as required in accordance with the export regulations, and as a result, the aircraft were shipped overseas without the required export filings.
  • Specific defendants 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.

The indictment allegations may have very serious consequences to AGC and WBAT customers. First, according to federal prosecutors, AGC and WBAT have been effectively shut down by order of the court. Second, the government is seeking $350 million in restitution, which may impact escrow clients’ access to their seized funds. Third, AGC clients who based their aircraft overseas without properly exporting the aircraft may face civil or criminal penalties and/or aircraft seizure. Fourth, all AGC and WBAT aircraft transactions, trust transfers and financing matters are now subject to prior government approval, which will delay transactions and may trigger loan or lease defaults. Fifth, non-U.S. citizens will not be able to maintain their aircraft on the U.S. registry if their trust is dissolved.

Vedder Price has been assisting clients with WBAT and AGC matters, including funds recovery, aircraft transactions, trust transfers and export compliance review and rectification, since the government seized the accounts of WBAT and AGC in December.

“We have a dialogue with the U.S. Attorney’s Office, and our primary focus is to assist clients with the complex issues associated with the WBAT and AGC matter. It’s important to promptly identify and resolve each client’s risks and assess the collateral damage,” Hernandez said.

“As a former FAA enforcement attorney and experienced transactional attorney, David has over two decades of experience assisting clients with complex aircraft transactions, trusts and government investigation/enforcement matters, and he is uniquity qualified to lead the task force and resolve the issues associated with the WBAT and AGC indictment,” Geoffrey R. Kass, chair of Vedder Price’s global transportation finance team, said.

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