Wednesday, June 19, 2013
Court Throws Out Ex-Prosecutor’s Conviction for Looting Trust
By KENNETH OFGANG, Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday tossed out the fraud and money laundering convictions of a former Bay Area prosecutor who admitted taking more than $52 million from a trust.
Mark J. Avery, now 54, pled guilty to a 15-count information in the U.S. District Court for the District of Alaska in 2008 and was sentenced to 8.5 years in prison. But Judge Richard C. Tallman said Avery is entitled to habeas corpus relief because the conduct to which he pled guilty does not violate federal criminal statutes, under Skilling v. United States (2010) 130 S. Ct. 2896, a case arising out of the Enron scandal.
Skilling rejected the Justice Department’s broad interpretation of the federal law making “honest services” fraud a crime, limiting the reach of the law to bribery and kickback schemes.
Avery, according to Bureau of Prison records, is serving his sentence at Federal Correctional Institute-La Tuna, on the Texas-New Mexico border north of El Paso. The appeals court ruling allows prosecutors to press the case if they believe they can convict him on a different theory.
Fraudulent Scheme Alleged
The information to which he pled guilty accused Avery of having engaged “in a fraudulent financing scheme in which he abused his fiduciary obligations and his position of trust to acquire over $52 million dollars through an ambiguous loan arrangement which used the May Smith Trust as collateral.”
According to news accounts—the case has been reported on in the San Francisco Chronicle and in several Alaska publications—Avery was one of three trustees, a position that reportedly paid him about $400,000 per year, in addition to fees for legal services rendered. He took over as a trustee following the 2001 death of his father, prominent tax and trust attorney Luther Avery.
Prior to his father’s death, Mark Avery was a deputy district attorney, first in Santa Clara County and then in San Francisco. He was one of 14 deputies fired by incoming District Attorney Terence Hallinan in 1996.
Avery, who Hallinan told the Chronicle was “real bitter” about the firing, claimed the termination violated his free speech rights and sued, but was unsuccessful. He subsequently moved to Alaska at the urging of a friend and former Californian, Ethan Berkowitz, who subsequently became an Alaska legislator and was the Democratic candidate for governor three years ago.
Avery got a job as a prosecutor in Anchorage, resigning after his father died and he took over as one of the Smith trustees. The beneficiary, who suffered from dementia and died in 2006, was the widow of an Australian who made hundreds of millions of dollars through mining in Malaysia.
The $52 million that Avery borrowed was used to pay for various items and to pay off “personal mortgages”—Avery bought a 5,300-square foot mansion in the Anchorage suburbs—and pay for jet air travel for him and others, including the other trustees and their friends and families. He also started a private aviation firm and other businesses which collapsed, forcing him to file for bankruptcy and resulting in foreclosure on collateral that had belonged to the trust.
The Chronicle reported that “he also bought five World War II- vintage planes, a dozen Czech jet fighters, several helicopters, a $230,000 Carver Yacht, a Navy-style patrol boat, two Soviet-era rocket launchers, several all-terrain vehicles, two motor homes and several snow machines.”
Avery’s business associate, Rob “Commander” Kane, reportedly obtained the jet fighters with plans to transfer them to the Philippines to train pilots, even though that country has no air force. Kane was arrested on federal firearms charges in the course of the FBI’s investigation into Avery, but was acquitted.
Writ of Habeas Corpus
Avery, meanwhile, waived his right to a direct appeal of his criminal convictions as part of the plea agreement. But after the Skilling decision, he petitioned the district court for a writ of habeas corpus.
District Judge Ralph R. Beistline ruled that the claim was procedurally defaulted because it was not raised at the time of the original proceedings and did not amount to a claim of actual innocence. But Tallman said the district judge was wrong on the latter point.
“The government concedes that Avery is actually innocent of honest services fraud in light of Skilling, which confined the reach of the offense to ‘paradigmatic cases of bribes and kickbacks,’” the appellate jurist explained. “…Since no evidence suggests that Avery either engaged in bribery or received kickbacks, the crime to which Avery pled guilty and for which he stands incarcerated is no longer a criminal offense.”
Tallman rejected the government’s argument that the charges to which Avery pled guilty encompassed more traditional theories of fraud. While the language of the information was broad enough to encompass “money-or-property based wire fraud,” the judge reasoned, all that Avery admitted to in the plea agreement was that he had “made up a scheme or plan to defraud the May Smith Trust of its right to his honest services,” “acted with the intent to deprive the May Smith Trust of its right to honest services as a trustee” and “cause[d] a scheme or plan in interstate commerce.”
Nor did Avery admit any form of money- or property-based fraud in the plea colloquy, Tallman said.
The case is United States v. Avery, 12-35209.
Copyright 2013, Metropolitan News Company