In America, corporations are people and those corporate people can take the rap for you sometimes, according to Manafort’s defense team. The prosecution rested Monday, but before the defense called its first witness, it gave a sneak preview of its closing argument for why Manafort shouldn’t go down for failing to tell the government about his foreign bank accounts: It wasn’t Paul’s problem. His company should’ve done that.
Welcome to Rabbit Hole.
The government rests: The sneak preview came courtesy of arguments before Judge Thomas Ellis about whether the prosecution should be allowed to call its final witness, Treasury Department Special Agent Paula Liss, to tell the jury about whether Manafort ever told the government about his foreign bank accounts. Manafort, as the court later learned, had not, but defense attorney Thomas Zehnle said the jury shouldn’t hear that because it wasn’t Manafort’s job to tell the IRS about the many bank accounts in Cyprus; it was the responsibility of DMP International, his company.
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Not my job: If DMP International had a responsibility to report its foreign bank accounts, which actual sentient human being would’ve had to fill out the paperwork to do that? Not Manafort, argued Zehnle. Only someone with a greater than 50 percent stake in the company would be required by default to do the reporting. Since Manafort represented his company as a 50-50 split between him and his wife, no one had that requirement, according to the defense.
Coulda shoulda woulda: If the feds were so upset about DMP International’s failure to report the accounts, it should’ve included the company in its indictment, but it didn’t. “The government has already thrown the kitchen sink at him,” Zehnle complained. “Now they want to throw the plumbing and pipes, too.”
Au contraire: The prosecution didn’t see it that way. Part of Manafort’s defense is that he just also didn’t understand the complex requirements of tax law and his obligations under them. Therefore, he didn’t have the requisite intent to lie on his taxes. Prosecutor Uzo Asonye reminded the judge that the government already introduced evidence showing that Manafort’s accounting firm specifically told him in its engagement letter that he had a responsibility to report the company’s foreign bank accounts
About that ownership stake: The government also has some insurance in the form of an argument that Manafort didn’t always represent himself as having only a 50 percent share in his consulting company. Asonye reminded Judge Ellis that Manafort presented his ownership stake in the consulting business as 100 percent in a previous Foreign Agent Registration Act form filed with the Justice Department.
About that fishy loan: The government’s final witness on Monday, Federal Savings Bank Vice President James Brennan, testified that he rated the risk of Manafort’s loan lower than he believed it should be because bank CEO Steve Calk wanted the loan to go through. Dennis Raico, another bank employee, testified last week that he was already “uncomfortable” about the fact that Calk and Manafort, then working for the Trump campaign, had discussed a possible job for the MAGA-inclined CEO as secretary of the Treasury or of Housing and Urban Development in a future Trump administration as the two talked Manafort’s loans.
Red flags: Emails from bank employees showed Brennan and others concerned about a number of red flags about Manafort as a creditworthy borrower. His mortgage on his Brooklyn home was in default. He was 90 days past due on his American Express credit card on nearly $300,000 in charges after purchasing luxury New York Yankees season tickets (“the large size of the delinquency is troubling”), the income his business reported in 2015 was “inconsistent” with the income reported on his taxes, and he had no money coming in for 2016 because he was working as a volunteer for the Trump campaign (“shows no income as of 7/31/2017, only $648,046 in expenses”).
Big payday: Nor was this any run-of-the-mill risk for the bank. At the time it was made, Brennan said Manafort’s $9.5 million cash-out refinancing on his Hamptons estate was the largest single loan Federal Savings had on its books.
Thumb on the scales: So why make the loan despite those red flags? “It closed because because Mr. Calk wanted it to close,” Brennan told the court. Despite his personal reservations, though, Brennan said he rated the risk of the loan as a 4, the highest risk rating the bank would allow for its own rating and much lower than he personally thought was warranted. Why assign what he felt was an overly generous rating? “Because the loan was going through,” Brennan said. Since the loan appeared to be a fait accompli, he explained, giving it an acceptable risk rating would look better on the bank’s books later on.
No paper trail, please: While Brennan had his name on paperwork artificially lowering Manafort’s risk, he wanted John Calk, Steve’s brother, who had an ownership stake in Federal Savings, to sign off on the loan, too. John Calk refused. In cross examination, Manafort’s lawyers tried to suggest that Calk may have refused simply because he didn’t have enough information to weigh in. In any case, Federal Savings has subsequently instituted a policy mandating signatures from its credit committee.
You down with OCC? The court also learned that it wasn’t just Federal Savings employees who had concerns with the Manafort loan. The bank’s regulator did, too. Under cross examination, Brennan said the Office of the Comptroller of the Currency had problems with the $9.5 million Manafort loan against his Hamptons property. In particular, regulators were concerned that Federal Savings had used the average of two appraisals on the property instead of the lower appraisal value in its loan process and that some money from Manafort’s business was treated as income rather than a one-time event.
