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Ex-offshore banker details travel scam

McMurray man target of felon's testimony

Thursday, March 01, 2001

By Torsten Ove, Post-Gazette Staff Writer

By one conservative estimate, $70 billion in tax money is lost every year to secret accounts squirreled away on Caribbean islands.

Yesterday in federal court, a jury heard from the man who has done more to expose that clandestine financial world than anyone in the history of Internal Revenue Service investigations.

John M. Mathewson, a convicted felon and former chairman of Guardian Bank & Trust on Grand Cayman, took the stand to testify against Roy D. Davis Jr., 44, a former McMurray travel agent charged in a scheme to bribe two US Airways managers and hide the payoffs in Mathewson's bank.

The white-haired, 72-year-old Texan walked into court with a cane, then pored over his defunct bank's records to show that Davis opened an account at Guardian in 1993 in the name of Frenum Corp., a sham company, and eventually transferred $100,000 to the two US Airways executives, Tom Fitzmorris and Richard P. Meyer.

Davis, former co-owner of Royal Travel Services who now lives in Florida, is charged with filing false corporate tax returns to hide the payments in 1993 and 1994. He is also charged with filing false personal tax returns for those years.

Fitzmorris and Meyer pleaded guilty Tuesday to filing false tax returns for 1994 and agreed to testify against Davis.

IRS agents said the $100,000 was listed in Davis' corporate records as expenses for transportation and other services.

In reality, prosecutor Brendan Conway said, the money represented kickbacks to Fitzmorris, the former head of US Airways charter service, and Meyer, an account executive, in exchange for discounts on charter vacation flights to Orlando, Fla.

Conway said Davis altered financial records of Royal Travel and lied to his longtime accountant and his bookkeeper about where the money was going.

Fitzmorris and Meyer had a cozy relationship with Davis that included golf outings, hunting trips and vacations on Royal Travel's dime.

Fitzmorris, 69, formerly of Rochester but now living in Hobe Sound, Fla., worked for the airline from 1975 until he retired in 1997, and Meyer was his second-in-command.

But the kickback scheme was at the heart of the relationship, according to the government.

Meyer, 53, of Green Tree, said it began with cash payments at lunch meetings in the early 1990s. But in 1993, he said, Davis decided to move the transactions to Guardian Bank & Trust to avoid detection by the IRS.

In 1993, Meyer said he, Davis and Fitzmorris flew to Grand Cayman. Mathewson set up their accounts using the names of dummy corporations provided by Guardian for $5,000 each, plus a $3,000 annual fee. Mathewson assured his customers the sham corporations provided "complete anonymity."

According to Meyer and IRS reports, the scam worked like this:

Davis would ask for a 110-seat plane from US Airways for what should have cost him $12,000. Without the knowledge of the airline, the two charter managers would rent the plane to him for $11,000. Then the three divvied up the extra $1,000 and tucked it all away in Mathewson's bank. They repeated the split every time a Royal Travel plane headed to Orlando.

"I would receive $250, Mr. Fitzmorris would receive $250 and Mr. Davis would receive $500," said Meyer, who left the airline in January. "It was a mutual agreement."

Davis' attorney, Stanton D. Levenson, insisted the airline employees weren't merely accepting payoffs but were actively shaking down his client for $50,000 a year -- despite the fact that the three were buddies.

"Money has no friends," he said. "The government talks about bribery. We're going to talk about extortion."

He also said he'll prove that Davis' payments to Fitzmorris and Meyer were "proper business expenses," and will introduce witnesses to testify that such deals between airlines and travel agents are part of the routine cost of doing business in a competitive industry.

Without Mathewson's records, the case would never have come to light.

When the FBI arrested him for laundering money in a cable-piracy scheme in 1996, he turned over Guardian's records. For the first time, the FBI had access to the internal dealings of an offshore bank, exposing some 1,500 Americans as tax cheats.

The information was turned over to the IRS, which has been going after them ever since.



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