Aircraft Parts Fraud and Bank Fraud—Horridge and Sexton

Every now and then, a person will be indicted on charges that are rarely seen. For example, this morning, we mentioned that five men in Michigan had been indicted in part of possessing “khat,” which is a methamphetamine-like drug for which people are rarely indicted. Likewise, two men were indicted yesterday on bank fraud and aircraft parts fraud.^[1] The former is fairly common, but the latter is not.

According to the US Attorney’s Office in for the Southern District of Texas, Roy Horridge and William Michael Sexton have been charged with conspiracy to commit aircraft parts fraud, nine counts of aircraft parts fraud, and bank fraud.^[2] Mr. Horridge is the owner/operator of a Houston-based air ambulance service, and Mr. Sexton is a mechanic living in Scottsdale, Arizona.^[3] According to the indictment, the conspiracy allegedly began in January 1998, and ran through August 2004.^[4] During this time, it is alleged that the two men “conspired to submit false writings, specifically aircraft log book entries as to repairs and maintenance of the [air ambulance] fleet, for the purpose of deceiving the Federal Aviation Administration (FAA) and others regarding the airworthiness and monetary value of the aircraft.”^[5] It is also alleged that the men knew that the maintenance “was critical to the safe operation of the aircraft and placed at risk prospective pilots, crew, and passengers aboard the air ambulances.”^[6] The reason, according to the indictment, the men did not do the required maintenance is because “it was costly and required aircraft down-time.”^[7]

Bank fraud involves devising a scheme or artifice to defraud a financial institution or to obtain money from a financial institution under false pretenses.^[8] It carries a penalty of up to $1,000,000 in fines and up to 30 years in prison.^[9] The financial institution allegedly harmed in the conspiracy was Whitney National Bank, to which the eight aircraft owned by the air ambulance service were pledged as collateral.^[10]

Aircraft parts fraud is covered by 18 U.S.C. § 38, which makes it a crime for a person to “knowingly and with intent to defraud,” falsify or conceal a material fact concerning any aircraft or space vehicle part, make any fraudulent representation concerning such a part, or make or use any materially false writing or document concerning such a part.^[11] The punishment for a violation of section 38 is a fine, imprisonment for up to 10 years, or both.^[12]

This is the first time the statute has been used in the Southern District of Texas.^[13] It may, in fact, be the first time it has been used anywhere. The only mention of section 38 in published cases relates to its forfeiture provision as support for the fact that “most criminal forfeiture statutes do not set forth the procedures to be followed” but instead simply refer to 21 U.S.C. 853.^[14] This is somewhat unsurprising because the statute was enacted only in 2000.^[15]

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[1] US Attorney’s Office, Air Ambulance Operator and Mechanic Indicted for Aircraft Parts Fraud, Apr. 6, 2006.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] 18 U.S.C. § 1344.
[9] Id.
[10] USAO, supra note 1.
[11] 18 U.S.C. § 38(a)(1).
[12] Id. § 38(b)(4).
[13] USAO, supra note 1.
[14] See United States v. Razmilovic, 419 F.3d 134, 138 & n.2 (2d Cir. 2005).
[15] P.L. 106-181, Title V, § 506(c)(1), 114 Stat. 137.