A bank that loaned former Trump campaign manager Paul Manafort $16 million expects a $3.6 million surplus from foreclosure on Manafort’s properties, even though the loans played a role in the prosecution of Manafort and a separate charge against a Chicago banker who tried to get a job in the Trump administration.
It’s a surprising outcome for loans that federal prosecutors, the bank, the banker and Manafort himself said were the product of fraud and which formed a part of Special Counsel Robert Mueller’s multifaceted prosecution of Manafort.
The loans were also the centerpiece of the Justice Department’s prosecution of The Federal Savings Bank founder Stephen Calk on charges that he illegally sought to trade the $16 million outlay for a high-ranking job like a slot in Trump’s Cabinet or as secretary of the Army. Under federal law, it is a crime for an official at a federally-insured bank to take or seek a personal benefit in exchange for a loan.
In July, after a three-week trial, a federal jury in Manhattan took only hours to find Calk guilty on two bribery-related felony charges.
With Calk facing sentencing in February, his lawyers are seeking to downplay the impact of his crimes. As part of that submission, they filed a declaration from a bank official projecting that — when foreclosure is complete — the financial institution will have recouped a tidy sum above its costs.
“TFSB will likely recover at least approximately $3,611,000 in excess of the aggregate principal amount of the Manafort Loans,” the bank’s chief operating officer, Dan Semenak, wrote.
The bank has already recovered $9.3 million from the sale of Manafort’s 10-bedroom, six-bathroom Bridgehampton estate, whose carefully manicured trellises, moat and waterfall became symbols of excess at Manafort’s 2018 trial in Alexandria, Va. The bank also netted $2.3 million on Manafort’s waterfront condo in that same city and $3.1 million in cash that were subject to forfeiture when he stopped making loan payments following his 2017 arrest and a related court-ordered asset freeze.
A third property — Manafort’s brownstone in Brooklyn’s Carroll Gardens neighborhood — is still in the process of an “agreed foreclosure,” Semenak said. An appraisal and a broker valuation on that real estate anticipate a sale for almost $5 million, which should mean the bank winds up with about $19 million in collateral to repay the loans. (Manafort never drew about $600,000 of the approved loans.)
The remarkable reversal of fortune for the bank, which completely wrote off the loans on its balance sheet following Manafort’s arrest in 2017, was brought on by a number of factors including the pandemic-related boom in real estate prices and Trump’s pardon of Manafort just before Christmas last year.
The Justice Department had been trying to seize the Bridgehampton and Brooklyn properties as part of what Mueller’s prosecutors portrayed as an air-tight agreement to have Manafort forfeit his interests in the real estate to the government as products of Manafort’s tax-dodging and secret-influence-peddling crimes. The bank and its holding company tried to claim the properties in court, but prosecutors contended that Calk knew enough about Manafort’s fraud that the bank shouldn’t get the assets.
That legal fight ended abruptly in February, when the Justice Department concluded that Trump’s pardon wiped out the government’s interest in those properties not already disposed of by the feds.
It’s unclear who will reap the $3.6 million windfall the bank says it expects from the Manafort loans. In most foreclosures, the surplus after a sale would be returned to the borrower.
“The borrower can come out of a foreclosure sale getting a check written to them,” said Dale Whitman, a real estate finance expert and emeritus law professor at the University of Missouri. ”It doesn’t happen very often, but it can happen.”
However, a source close to Manafort told POLITICO Tuesday he does not expect to see any of the funds. The source said the expected $3.6 million surplus underscores that the loans were not sweetheart deals and included ample collateral for the bank.
It’s possible Manafort decided to cede his interest in the properties in exchange for the bank agreeing not to try to come after more of his personal funds, Whitman said. In that case, the bank would keep whatever profit it makes following the final foreclosure. Attorneys for Manafort did not respond to questions about whether such a deal was reached.
The Federal Savings Bank loans led to four of the 18 felony charges that Manafort faced in his Alexandria trial in 2018. While Manafort was convicted on two bank fraud charges related to other loans, the jury split, 11-1 on the four bank fraud and bank fraud conspiracy charges Manafort faced in connection with the FSB loans. A judge later declared a mistrial on those counts.
After entering into a plea deal with Mueller’s office, Manafort was sentenced to a total of about seven and a half years on various charges. Counting time in pretrial detention, he served almost two years of the sentence before being released to home confinement in May 2020 as federal prison authorities sought to trim their rolls due to the coronavirus pandemic.
Just before Christmas last year, President Donald Trump pardoned Manafort of all the charges he was convicted of, although some questions have been raised about whether the move successfully absolved Manafort legally of all the charges he originally faced.
For the moment, Calk, 57, is the one in most serious legal jeopardy. He faces a maximum of 35 years on the charges he was found guilty of, although defendants with no criminal record often get sentences far short of the maximum.
According to probation officials, nonbinding federal sentencing guidelines call for Calk to receive between about five and six-and-a-half years in prison. However, that calculation is driven almost entirely by the sum of money the judge deems linked to his crimes. Probation officials called for Calk to receive a “significant variance” below the guidelines.
Prosecutors have not yet made their recommendation for Calk’s sentencing, set for Feb. 7 before U.S. District Court Judge Lorna Schofield, an appointee of President Barack Obama.
Calk’s defense argued at trial that Calk, who never got a Trump administration job, never made any deal with Manafort regarding the loans. Calk did not testify, but his attorney Paul Schoeman said Calk was unaware of misrepresentations Manafort made during the process.
Schoeman insists that the circumstances of the Manafort loans and the ensuing prosecution are so unusual that his client should not be sent to prison.
“This case is truly unique in the annals of bank bribery prosecutions,” Schoeman wrote in a court filing Monday. “Mr. Calk gained nothing of monetary value for himself, the bank will profit from the loans, and he did nothing that was intended to impede or actually impeded the criminal investigation of his conduct.”
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By: Josh Gerstein
Title: Bank predicts $3.6 million windfall from Manafort loans
Sourced From: www.politico.com/news/2021/12/07/bank-3-6-million-windfall-manafort-loans-523905
Published Date: Tue, 07 Dec 2021 17:12:38 EST
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