McDonnells’ finances take center stage at hearing

Federal prosecutors exploring the allegedly corrupt dealings of former Virginia governor Robert F. McDonnell (R) asked witnesses called before a grand jury whether he and his wife were financially “desperate,” suggesting that they believed money woes motivated the couple to use the power of the governor’s office to enrich themselves, a McDonnell defense attorney said Tuesday.

At a hearing in federal court, attorney Daniel I. Small disputed that Robert and Maureen McDonnell were in deep financial distress. But he argued that because prosecutors seem to hold that view, the McDonnells should be allowed to present an accountant as an expert witness who would testify they were financially sound.

U.S. District Judge James R. Spencer did not immediately rule on the McDonnells’ request to call J. Allen Kosowsky, the accountant McDonnell wants to use in his defense, as an expert or on any other motions discussed in court, although he said Tuesday that he would work to do so “by tomorrow.”

The McDonnells’ financial health has long been at the center of the federal corruption case against them, and during Tuesday’s hours-long hearing — the last scheduled before the case is to go to trial July 28 — the issue again took center stage. Kosowsky testified that the former governor had a positive net worth, retirement accounts he could liquidate and some proceeds from his father’s estate.

Kosowsky said that McDonnell had even turned down an executor’s fee of more than $30,000 when he divided that estate among relatives, an act the accountant deemed “generous.”

McDonnell and his wife were charged in January in a 14-count public-corruption indictment alleging that they lent the prestige of the governor’s office to Richmond businessman Jonnie R. Williams Sr. and that, in exchange, Williams lavished gifts and money on them. The McDonnells have pleaded not guilty.

Prosecutors have broadly alleged that Willliams helped the couple live a life of extravagance when their own finances might not have allowed it. They have said the businessman paid for golf outings for Robert McDonnell and his sons and took his wife on expensive shopping trips. They have also said that Williams gave the couple tens of thousands of dollars in loans — in part to support a real estate company the governor owned with his sister.

At the hearing Tuesday, Kosowsky testified that although that company sometimes incurred late fees in paying back a loan, those fees were typically only $25 or $30 and payments were never more than 30 days past their due date. He said the former governor had credit cards with low interest rates, significant earning potential as a former public official and retirement accounts from which he could draw — although he noted that McDonnell had already liquidated a portion of one account for $10,000.

Kosowsky also testified that Robert McDonnell’s sister reported income of more than $500,000 in 2013 and had stock assets worth about $1 million.

“The money was there,” Kosowsky testified.

Prosecutors argued that many of Kosowsky’s observations were common sense and that the defense did not need to call him as an expert witness.

Also Tuesday, the governor’s legal defense fund filed tax forms indicating that it had received almost $93,000 in contributions in the second quarter of this year. That is a significant decrease from the first quarter, when the fund reported nearly $150,000 in contributions, including $10,000 from 2012 presidential nominee Mitt Romney (R).

Among the second-quarter contributors were Randal Kirk, a wealthy biotech developer and previous McDonnell campaign contributor; Teri Rigell, the wife of Rep. Scott Rigell (R-Va.); and state Sen. Jeffrey L. McWaters (R-Virginia Beach), founder of Amerigroup, a health-care company.

The fund has previously estimated in e-mail appeals that McDonnell would need $1 million to pay his legal fees. Kosowsky testified that he was billing McDonnell $400 an hour, a discount from his usual rate. Another legal expert testified last week that he was billing $940 an hour.

Notably, none of the fund’s second-quarter expenditures were directed to the law firms representing McDonnell and his wife in federal court. McDonnell’s defense attorney declined to comment after the hearing.

Rosalind S. Helderman and Laura Vozzella contributed to this report.

Matt Zapotosky covers the federal district courthouse in Alexandria, where he tries to break news from a windowless office in which he is not allowed to bring his cell phone.
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