The case is being prosecuted by the special counsel investigating Russian interference in the 2016 U.S. presidential election.
What we learned from Day 10 of the trial:
• Paul Manafort or his agents neglected to mention mortgages on two New York properties when he sought $16 million in loans
• A vice president of Federal Savings Bank said he wouldn’t have approved the $16 million loans, but the bank CEO pushed them through
• The prosecution rested its case in chief, and the defense will argue its motion to acquit on Tuesday
5:04 p.m.: The prosecution rests after recalling Treasury agent as final witness
The special counsel’s office has called its final witness in its case in chief against Paul Manafort.
The special counsel’s last witness was Paula Liss, a special agent with the Treasury Department’s Financial Crimes Enforcement Network. Liss had testified early in the trial but was called back to be questioned about whether Manafort’s companies had reported any foreign bank accounts between 2011 to 2014. Liss said the department had no record of any such “FBAR” reports.
Liss left the stand after five questions.
“Your honor, the government rests,” prosecutor Greg Andres said.
Afterward, defense attorneys, in a procedural hearing, asked that the charges against Manafort be dismissed saying the evidence lacks “materiality” and “a failure to show the necessary willfulness.”
Judge T.S. Ellis III sealed the courtroom without ruling on the defendant’s motion for acquittal or asking whether Manafort will present any evidence.
“What we do will not be permanently sealed,” he told media and onlookers gathered in the courtroom. “When the case is over, the seal will be lifted.”
Lead defense attorney Kevin Downing asked to have until tomorrow morning to put together his motion for acquittal, and Ellis agreed.
5:01 p.m.: Special counsel’s final witness is return of Treasury agent
Judge T.S. Ellis III allowed prosecutors to call back Paula Liss, a special agent with the Treasury Department’s Financial Crimes Enforcement Network. The special counsel confirmed that she would be their last witness.
Prosecutors intend to ask Liss if Paul Manafort’s consulting firm ever reported foreign bank accounts. Ellis said he would instruct the jury that they cannot find Manafort guilty for his company’s failures, but that they can use the evidence to decide his “willfulness” in not reporting 32 overseas accounts on his personal tax returns.
After Liss answers three questions from prosecutors and any cross-examination from the defense, Ellis said he will hear motions to acquit.
4:39 p.m.: Judge spars with prosecutors again, says ‘You could have indicted the company, but you didn’t’
Whether or not Paul Manafort’s prosecutors are done with the case depends on how Judge T.S. Ellis III rules about whether an agent from the Treasury Department can retake the stand.
Paula Liss already testified that Manafort did not report foreign bank accounts on his taxes. Prosecutors want her to come back and say his consulting firm didn’t either.
Defense attorney Thomas Zehnle said that in closing arguments, they do plan to say Manafort had no obligation to report foreign bank accounts in the years he only owned 50 percent of his firm, Davis Manafort International.
“It’s very clear that if you do not own more than 50 percent of the entity, you do not have a responsibility,” Zehnle said.
Manafort’s wife owns the other half of the company and they file joint tax returns.
He is accused of failing to report the foreign bank accounts from 2011 to 2014. For one year charged, 2011, Manafort was the firm’s sole owner.
When Manafort filed as a foreign agent in 2017, prosecutor Uzo Asonye noted, he also described himself as owning 100 percent of the business.
Ellis pointed out that Davis Manafort Partners, later Davis Manafort International, was not accused. “You could have indicted the company, but you didn’t,” he said.
Asonye said that was true, but it was the defense that was now making the argument that this was a corporate responsibility.
Ellis took a short recess to decide the issue, predicting neither side would like his ruling.
During cross-examination of Federal Savings Bank vice president Jim Brennan, defense attorney Richard Westling raised the possibility that the bank may have been at fault for errors that affected Manafort’s loans.
Westling pointed to an incorrect address Brennan had entered in one application and made mention of another error by another employee that “made Mr. Manafort’s income look better.”
Westling also asked Brennan about a review of one Manafort loan conducted by a regulatory body called the Office of the Comptroller of Currency. During a review of the bank’s business, the bureau within the U.S. Department of Treasury had concerns about how the loan was analyzed, but didn’t raise any flags about information provided by Manafort.
Brennan testified that one of the loans received a rating of 4 – the lowest possible rating an application could get before it would be rejected. Brennan said he would not have approved the loan and it would have gone on the bank’s “watch list,” but he didn’t have a choice to give the loan the bare minimum rating. When asked by the judge why he gave the loan a passing grade if it didn’t deserve it, Brennan testified that Calk had pushed for it.
The two loans of $16 million combined represent the largest loans the bank had ever issued up to that point in time, Brennan testified.
Brennan testified that he told the FBI in June 2017 the loans were performing. But he said that by Dec. 31 of that year they had been written off and the bank had lost $11.8 million. As of now, none of the collateral Manafort provided has been seized by the bank, Brennan testified.
Westling pointed out that it wasn’t a secret that Manafort wouldn’t have any reported income in 2016. It was understood and “out in the open” that Manafort was working for free for then-candidate Donald Trump. Westling also pointed to a bank document that calculated Manafort’s estimated net worth to be nearly $21.3 million when the loans were issued, which the defense could leverage to show that Manafort had the ability to pay back the loans.
Brennan concluded his testimony shortly before 4 p.m.
2:55 p.m.: Defense suggests Manafort didn’t fill out loan applications, and terms of loan (7.25% interest) weren’t great
Defense attorneys for Paul Manafort are again trying to argue that their client either wasn’t the one who filled out documents inaccurately when applying for loans or else did not know he had done anything wrong.
Asking about a profit-and-loss statement showing Manafort’s firm made $4.4 million in 2015, Richard Westling asked Federal Savings Bank vice president Jim Brennan if any one person must prepare such documents or whether there’s anything wrong with updating such statements as necessary.
Brennan agreed that anyone at the company could update such documents if needed. But multiple witnesses have testified that Manafort’s firm made less than $400,000 in 2015, and that there was no reason to believe more money would be coming in when that document was sent to Federal Savings Bank in 2016.
Westling went on to suggest that the loan was hardly a favorable one, given that Manafort put up two properties as collateral, a $12 million house in the Hamptons and a $2.7 million condo in Alexandria, as well as $615,000 cash. The interest rate was 7.25 percent, and Manafort had to pay a $285,000 fee.
Brennan said that for the size and type of loan, all the terms were standard, and the properties would not guarantee repayment.
“If the bank had to foreclose, it’s always a question whether we’ll get our money back,” he said.
He confirmed that, in fact, the loans to Manafort still had not been repaid.
Westling referred to the fact that Manafort did not have income in 2016, asking Brennan to confirm that he knew Manafort had taken a “voluntary position.” That referred to Manafort’s unpaid role in Trump’s 2016 presidential campaign. Brennan acknowledged he was aware of that.
Brennan said that he was aware that Manafort’s American Express bill had a $300,000 outstanding debt, the bulk of which was for Yankees season tickets, had been paid off by the time both loans were approved, and his credit score had improved. Brennan said at that point Manafort had “acceptable” credit.
Westling also raised the possibility that Manafort, who was doing real estate business with his son-in-law, did not fill out the loan applications himself, although they were signed with his name. He also suggested Manafort was unaware that he had to report outstanding debts that were not his alone.
Brennan pointed out that the bank’s loan application form makes clear the debts include “loan guarantees” and “financial obligations,” not just loans to the borrower alone.
Jim Brennan, a vice president at Federal Savings Bank, also testified Monday that Paul Manafort didn’t declare on his financial applications that he had mortgages on two properties in New York, information that would have made it harder for him to secure a loan.
Manafort was approved for one loan with Federal Savings Bank, but rejected it at the signing table, Brennan testified. Manafort laid out new terms for the loan. The president of the bank, Javier Ubarri, rejected the new proposed loan structure, but the loan closed anyway, Brennan said.
“It closed because Mr. Calk wanted it to close,” Brennan said referring to Federal Savings Bank CEO Steve Calk.
On Friday, a former Federal Savings Bank Employee had testified that Calk helped Manafort secure loans with the bank because Calk had wanted a Cabinet-level position in the Trump administration.
An email between bank employees presented Monday showed financial details Manafort provided to the bank were “red flags” and inconsistent, Brennan said. Manafort had declared more than $4 million in income for his business DMP International in 2015, but other documents showed far less, and in 2016 he had reported no income at all and expenses of more than $630,000. Manafort also had an outstanding American Express credit card bill of more than $300,000, causing bank employees to question whether Manafort could pay back loans if he were approved.
“Although Mr. Manafort’s credit is for the most part good, the large size of the delinquency is troubling,” the email said.
Manafort later told bank officials he let his “friend” borrow the credit card to purchase season tickets with the New York Yankees and had not yet been paid back. Manafort later indicated that friend was his business partner Rick Gates, but on Friday a Yankees executive said Gates has never purchased season tickets with the team.
1:52 p.m.: Bank VP says Manafort’s claim of $4.4 million income in 2015 was ‘inconsistent’ with records
Jim Brennan, a vice president at Federal Savings Bank, testified Monday afternoon that a statement the bank got from Paul Manafort in August 2016 claiming $4.4 million in income the previous year was “inconsistent” with other records.
Several witnesses have testified that that the firm actually made less than $400,000 in 2015. Ex-Manafort employee Rick Gates testified that he sent the authentic profit-and-loss statement to his boss as a Word document so it could be doctored.
Such inconsistency “would go to the character of the borrower, which should mean that we would raise a red flag,” Brennan said. “You want to know who you’re lending to… and that the information they give you, you can rely on.”
On Friday, while questioning a former employee, defense attorneys suggested that Manafort put up enough collateral through real estate to guarantee the $16 million lent by the bank.
Prosecutor Greg Andres tried to undercut that idea Monday, asking Brennan whether The Federal Savings Bank generally relies on real estate sales for repayment for loans
No, Brennan said. “We’re not in the business to own real estate,” he testified. “We’re in the business… to get repaid.”
Brennan, who still works at the bank, is the secretary for the credit committee that approves loans. He is testifying under an immunity order, which he said means “I cannot be prosecuted unless I commit perjury.”
1:41 p.m.: Trial underway, vice president of bank which loaned Manafort $16 million takes stand
Paul Manafort’s trial resumed shortly after 1:15 p.m. Monday, with Judge T.S. Ellis III saying the jury would hear from one of the last prosecution witnesses before he addressed motions from both sides.
One of those motions includes a sealed filing Manafort’s defense submitted today. Prosecutor Greg Andres said the government has responded under seal. There was no indication in open court about the content of the motions.
After a brief sidebar, Jim Brennan, an employee of Federal Savings Bank, took the stand. Brennan, who received immunity for his testimony, is a vice president with the bank from which prosecutors say Manafort fraudulently secured $16 million in loans.
12:30 p.m.: Prosecution expected to conclude case, trial starts at 1 p.m.
Prosecutors are expected to finish their case in chief against Paul Manafort this afternoon. Manafort’s defense has given no indication yet of how many witnesses they intend to call, but Judge T.S. Ellis III has made clear he believes the case will be done by mid-week. Trial does not begin Monday until 1 p.m.
The final witness for the prosecution may be Jim Brennan, a second employee of Federal Savings Bank given immunity for his testimony.
Brennan, identified as a vice president in charge of construction and commercial loans at the bank, came up several times in testimony Friday. It was Brennan whom witness Dennis Raico emailed, saying “take a deep breath” when Manafort started dictating new loan terms in the middle of closing on a $9.5 million line of credit. He was also included on an email in which bank president Javier Ubarri said the bank should stop negotiating with Manafort.
Prosecutors have said they also want to call back Paula Liss, a a special agent with the Financial Crimes Enforcement Network of the Treasury Department. Liss testified that Manafort did not report any foreign bank accounts on his tax returns from 2011 to 2014 — the source of four of the 18 charges he faces. An FBI forensic accountant testified last week that offshore accounts controlled by Manafort took in over $60 million during that period.
Defense attorneys have suggested through their questioning that Manafort believed he was under no obligation to file those reports. They asked Liss about the corporate filing requirements, suggesting he thought it was his consulting firm’s obligation. So prosecutors want to ask Liss whether Manafort’s business reported any foreign bank accounts either. (In court papers, they say the company never did). Ellis has barred that line of questioning.
“They’re not accused of failing to file. We’re only focused on his obligation to file. You could have indicted him for more, but you didn’t,” Ellis said at a bench conference last week, according to a transcript included in a defense filing.
Prosecutors say Manafort’s defense “opened the door to that line of questioning by claiming that he failed to file FBARs due to the complicated regulatory structure.”
Ellis said he would rule Monday.
The special counsel also filed a brief arguing that even if Federal Savings Bank chairman and CEO Steve Calk knew Manafort lied to get $16 million in loans, Manafort still defrauded the bank.
The filing was sparked by a comment Ellis made in a bench conference Friday, suggesting any falsehoods were immaterial if Calk knew about them and gave Manafort the loans because of his own ambitions to serve in the Trump campaign and administration.
“The trouble I’m having is that one of the conspirators is an owner of the bank that you contend was defrauded,” Ellis said, according to the transcript.
In their filing, prosecutors note that Calk is the majority but not the sole shareholder in the bank, and that he is not the corporation.
“Calk is not [the bank] and the funds that were the subject of the fraud were not Calk’s,” they write.