Former Virginia governor Robert F. McDonnell (R) and his wife, Maureen, are battling a 14-count public corruption indictment that alleges that they lent the prestige of the governor’s office to a Richmond area businessman and that, in exchange, the businessman lavished them with gifts and money.
On Tuesday, former Virginia governor Robert F. McDonnell’s sister took the witness stand at his corruption trial to make the case that his marriage was far more strained than his finances. The assertion is key to the defense of McDonnell and his wife, Maureen, who say that their relationship was too troubled to support a conspiracy and that McDonnell would never stoop to unethical behavior for money.
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As Day 18 of the trial begins, jurors will get to hear even more from J. Allen Kosowsky — an accountant and expert witness who on Tuesday laid out the defense’s best argument for why the McDonnells were not broke.
Assistant U.S. Attorney Ryan Faulconer had only just begun cross examining Kosowsky when court ended for the day Tuesday, so it is likely he will try to poke more holes in the accountant’s rosy portrait of the McDonnells’ financial health.
The testimony might be dry, but it is important. Prosecutors allege that financial woes caused the Robert F. and Maureen McDonnell to seek the generosity of Jonnie R. Williams Sr. — particularly when it came to the $70,000 in loans Williams gave to a real estate company the governor owned with his wife. The degree to which jurors believe the former first couple was actually having money troubles could weigh heavily as they consider whether the governor and his wife were engaging in a corrupt bargain with Williams.
Who will testify after Kosowsky is not completely clear. Cailin McDonnell Young, one of the McDonnells’ daughters, was seen lingering in the hall outside the courtroom late Tuesday. Though prosecutors called her as part of their case, it is possible defense attorneys could bring her to the witness stand again. Williams paid $15,000 for the catering at her wedding — and she testified earlier that her mom initially pocketed an overage from that payment. Williams also claims McDonnell Young once called him about possibly buying her a vehicle — even offering specifics on one she had found — though he said he turned her down.
The McDonnell defense team has also indicated they will call witnesses to talk only about Bob McDonnell’s character. Though jurors have heard many family members and former staffers extol the former governor’s virtues, they have not yet heard any address that subject exclusively, as character witnesses do.
And all of Richmond, it seems, is waiting anxiously for the former governor himself to take the stand, as his defense attorneys have promised he will do. Once he does, experts say the case will essentially boil down to his performance on the stand.
The proceedings get underway at 9:45 a.m.
A man in a gray, striped suit wearing a Guy Fawkes-style mask is standing outside the federal courthouse in Richmond on Wednesday in an apparent protest of Gov. Robert F. McDonnell.
Though it’s kind of hard to tell.
The man, who declined to give his name but says he has lived in Richmond for 35 years, said he decided to come to the courthouse “just to have some fun.” He is carrying a waist-high billboard with writings that are critical of the governor and his wife, Maureen, and handing out similar literature to passers-by, greeting each with a cheerful, “Would you like to have some kindling for your fireplace?”
The man’s writings are rambling, but he seems to be self-aware.
“It’s a circus, already,” he said.
The man said he would stay for some part of the morning, then head back home. And he said he does have a message, aside from contributing to the outlandish nature of the trial.
“You know, public officials need to realize that you can’t just go out and squander public tax dollars.”
That is not exactly what the McDonnells are charged with, though they are accused of defrauding citizens of their right to the governor’s honest services.
The proceedings begin Wednesday at 9:45 a.m.
With his first few questions Wednesday, Assistant U.S. Attorney Ryan Faulconer seems to be trying to pull a fast one on the defense’s accounting expert — with some success.
Faulconer opened the proceedings for Day 18 confirming that the expert, J. Allen Kosowsky, had only four or five conversations with Robert F. McDonnell in preparation for the trial. Then — saying he was doing so “to be fair” — Faulconer asked the accountant whether he and the governor had talked about McDonnell’s father’s estate.
Kosowsky eventually confirmed he had, and Faulconer followed up with a question that defense attorneys had already asked.
“You’re not a personal friend of Bob McDonnell, are you?” Faulconer asked.
“This is a complete business relationship,” Kosowsky responded.
The importance is subtle and might be lost on jurors. But McDonnell’s defense team has suggested the governor and his wife once considered Richmond businessman Jonnie R. Williams Sr. a friend — even though they barely knew him before he started lavishing them and their family with gifts in 2011. Williams has insisted their relationship was all business: he gave the first family loans, vacations and luxury goods for their help promoting his company and its supplement.
Faulconer seemed to be drawing a comparison between the governor’s relationship with Williams and the McDonnell’s relationship with his expert accounting witness.
Faulconer pressed the point: He asked Kosowsky whether he is generally hired because he has a particular skill or ability that his clients do not. Kosowsky said generally that was true, although it was typically lawyers — rather than the defendant himself — who arranged for his services.
That, too, might be similar to the relationship between Williams and McDonnell, as Williams has said he was trying to buy the “credibility” of the governor’s office — something his millions of dollars in personal wealth did not give him on its own.
Assistant U.S. Attorney Ryan Faulconer is working to systematically poke holes in the testimony of J. Allen Kosowky, an accounting expert who has testified to Robert F. McDonnell’s general financial soundness.
For instance, Faulconer has just reviewed Kosowky’s testimony regarding former governor McDonnell’s retirement accounts. The forensic accountant had previously testified that making regular payments to a retirement plan is a sign of financial health, because it indicates a person has disposable income.
On Tuesday, Kosowsky had shown jurors a chart that indicated McDonnell had paid $14,400 into retirement in 2011 and $22,500 into the plan in 2012, the key years of his alleged scheme with businessman Jonnie R. Williams Sr.
Under Faulconer’s cross-examination, he conceded that McDonnell made no contributions in 2009 and a few thousand in 2010. It was only in 2011 when his contribution spiked — the same year that Williams gave a $50,000 loan to Maureen McDonnell. Likewise, the healthy 2012 contribution came in the same year that Williams provided $70,000 to the real estate partnership owned by McDonnell and his sister.
Kosowsky also conceded that McDonnell would have faced penalties and taxes had he tried to withdraw any of his retirement funds — which totaled more than $200,000 in 2012 — since he was not yet 59.5 years old. Kosowsky said he did not calculate the amount in penalties he’d have paid. Nor did he calculate the amount McDonnell’s sister would have paid in penalties and taxes had she tapped her even healthier retirement accounts to cover expenses in 2012.
As he continues his cross-examination of the defense’s accounting expert, Assistant U.S. Attorney Ryan Faulconer seems to be driving home that jurors should consider the money Robert F. McDonnell and his family made only in the context of what they spent it on.
The picture is not flattering for the former first family.
Faulconer asked defense accounting expert J. Allen Kosowsky in particular about 2009, when a chart the accountant prepared showed McDonnell and his wife, Maureen, had made about $190,000. First, Faulconer attempted to narrow that amount so that it would reflect only the couple’s “disposable income” — removing about $50,000 that was paid to cover mortgage interest on their home, about $58,000 in tax withholdings and some unspecified amount in fixed, living expenses. Kosowsky agreed the remainder would be income the governor could spend however he chose.
The prosecutor then posited a few items the governor might buy.
“Luxury clothing?” he asked, pausing so Kosowsky could confirm.
“Luxury watches?” he asked, pausing again.
“Golf?” he finished.
Jurors know, of course, that Williams gave all of those things to the former governor and his family as what of prosecutors say was a corrupt bargain to buy the support of the governor’s office for his company and its product.
U.S. District Judge James R. Spencer jumped into the action just now, expressing skepticism as an accounting expert for the defense contended that some of the McDonnells’ debts could be counted a liquid assets.
Prosecutors contend the governor and first lady hit up Star Scientific executive Jonnie R. Williams Sr. for loans and luxury gifts at a time when they were under severe financial distress. The defense contends that the couple was in sound financial shape, something that the expert, J. Allen Kosowsky, agreed was true.
Kosowsky said a series of loans that had been extended to the couple and a real estate partnership owned by the governor and his sister should be considered “liquid assets” rather than debt. As U.S. Attorney Ryan Faulconer tried to undermine Kosowsky’s contention, Spencer himself broke in.
“How is it that you determine this is a good thing, that this creates a sound financial situation to create a debt?” the judge asked.
Kosowsky said the loans could be seen as a line of credit that the McDonnells had the ability drawn upon, similar to home equity loan. He did concede, however, that using the loans also creates additional debt.
“What I’m hearing from you is, he had the ability to create debt and that made him better off?” the judge said.
Assistant U.S. Attorney Ryan Faulconer is scoring major points on the financial expert put on the stand by Robert F. McDonnell’s defense team to testify to the former governor’s overall financial health.
Accountant J. Allen Kosowksy had earlier pointed to the fact that the governor and his wife, Maureen, had plenty of credit left on their various credit cards as a sign of financial health. But Faulconer went through the cards with Kosowsky, flashing up card statement after card statement. One after another, Kosowsky agreed that while the McDonnells had credit remaining to them, purchases on the cards or cash advances borrowed against them came with steep interest rates — as high as 27 percent in one case.
“That would be higher than the 2 percent from Mr. Williams, correct?” Faulconer asked, referring to the loan terms Star Scientific executive Jonnie R. Williams Sr. extended for his money, in which the McDonnells would pay him nothing until 2015 and then would pay him back with 2 percent interest. “And they would all require some type of monthly payment, right?”
Kosowsky said they would.
Then Faulconer showed Kosowsky another chart the expert had prepared to demonstrate to the jury that the McDonnells were not in a dire financial straits when Williams provided his loans. This one was a graph that showed the couple’s credit card balances in 2011, at the time that Williams wrote a $50,000 check to Maureen McDonnell.
On the chart, Kosowsky showed that the couple had high monthly balances but that their debt had actually dropped prior to Williams’s providing money. In fact, the chart showed a quite steep drop right before the point of Williams’s loan — which was marked in a box. It was intended to show the couple did not need the dietary supplement executive’s money.
Faulconer then returned to the couple’s credit card statements — milking his point for the jury by displaying an image of a calculator on a large courtroom screen as he typed away and added up the cards’ balances, one after another. He showed that the couple had more than $30,000 in credit card debt in May of 2011. Kosowsky’s chart showed that they owed less than $20,000 at time.
Faulconer demonstrated that Kosowsky’s figure was only that low because the accountant had already built into his calculations nearly $20,000 in payments to the cards made by Maureen McDonnell using Williams’s money. The steep drop that Kosowsky’s chart showed as coming just before Williams’s lent his money actually resulted from the fact that his money was used to pay off some credit card debt.
Faulconer pressed Kosowsky — the box marking Williams’s loan on his chart, that should be prior to the drop in debt not after it?
“Yeah, it probably could be,” Kosowksy said.
“Should be,” insisted Faulconer.
“For fairness, sure,” Kosowsky said.
At the questioning of Assistant U.S. Attorney Ryan Faulconer, a defense accounting expert who reviewed the McDonnells’ finances acknowledged Wednesday that the first family shifted balances between credit cards — avoiding high interest rates until they could pay down the debt with Jonnie R. Williams Sr.’s money.
Records show the balance transferring seems to have occurred between two credit cards — one from Bank of America and the other from USAA — just before the state’s first lady, Maureen McDonnell, received a $50,000 loan from Williams in May 2011. That loan, importantly, was paid off with minimal interest, and only after the federal investigation began.
Records show that in April 2011, the McDonnells transferred a $10,000 balance from the USAA card to the Bank of America card, incurring a 4 percent fee. That allowed them to avoid a 7.75 percent interest rate that they would have had to pay if they had kept the balance on the USAA card, said J. Allen Kosowsky, the defense’s accounting expert.
Kosowsky acknowledged, though, they could have faced a 10 percent interest rate on the Bank of America card, should the balance have stayed there and not been paid off. But it was. In May 2011, Kosowsky said, the McDonnells seemed to use Williams’s $50,000 loan to Maureen McDonnell to pay off the Bank of America card.
Robert F. McDonnell’s defense attorney Dan Small has highlighted an important point about that credit card data chart that financial expert J. Allen Kosowsky had earlier conceded to a prosecutor was misleading: While the defense prepared the chart, it was never formally moved into evidence.
“It was because before we went to court, you noticed there was an error, correct?” Small asked.
“Yes,” Kosowsky said.
Kosowsky compiled the data, but he had not created the chart on a computer.
“You noticed the arrow was in the wrong place, correct?” Small asked.
Kosowsky agreed that he had.
Then Small swiveled all the way around from his podium in the well of the court to stare at Assistant U.S. Attorney Ryan Faulconer, seated at the government’s table. Faulconer had dwelled during his cross examination on the chart.
“You agree it would be misleading to spend a lot of time talking about a chart in which the arrow was in the wrong place?” Small said.
“Your honor, I object to this,” Faulconer responded.
The objection was sustained and Small moved on.