Bannon’s One-Time Co-Conspirators Admit They Cheated Trump Supporters in the Conspiracy Trump Pardoned Bannon For

Thus far, SDNY (which was busy arresting the former President of Honduras on drug-trafficking charges) has not yet posted the minutes of yesterday’s plea hearing for Brian Kolfage and Andrew Badolato, much less their plea agreements and statements of offense.

Here is Adam Klasfeld’s live-tweet of the hearing and his write-up.

Until those documents are posted, we’re left with varying press descriptions of men — with whom Steve Bannon was charged, until a last minute pardon from Trump got him off federal charges — who cheated a bunch of Trump supporters. Klasfeld’s headline gets to that relationship:

Two of Steve Bannon’s Former Co-Defendants Just Pleaded Guilty to Allegations He Dodged Through Trump’s Pardon

NYT led with Bannon’s pardon:

After Pardon for Bannon, 2 Admit Bilking Donors to Border Wall

In Donald J. Trump’s final hours as president in January 2021, he pardoned his onetime chief strategist, Stephen K. Bannon, who faced charges that he had conspired to swindle donors to a private group that promised to build a wall along the Mexican border.

But three men charged with Mr. Bannon were not pardoned, and two of them pleaded guilty on Thursday in Federal District Court in Manhattan.

The WaPo doesn’t even describe the crime in the headline,.

Disabled vet pleads guilty in border-wall scheme that included Bannon

WaPo describes Bannon’s involvement, and the allegation he personally cheated Trump supporters out of $1 million, this way.

“We Build the Wall” was a large-scale private crowdfunding effort orchestrated by Kolfage, Bannon, Andrew Badolato and Timothy Shea in 2018. Its stated goal was to help the federal government complete the coast-to-coast barrier President Donald Trump had repeatedly promised his supporters. The four men were arrested in August 2020, when prosecutors accused Bannon of personally pocketing more than $1 million.

Bannon, a far-right figure who was a key strategist in Trump’s 2016 campaign, followed Trump to the White House for a relatively short stint as an administration official.

Their relationship had not completely soured by the end of Trump’s presidency, and Bannon received a presidential pardon on the eve of Trump’s departure from the White House, part of a wave of more than 140 other clemency actions — including for Trump associates who were ensnared in the Justice Department’s probe into Russia’s interference in the 2016 election.

Here’s how CNN handles the guilty pleas and Bannon’s involvement:

Two of Bannon’s co-defendants plead guilty to ‘We Build the Wall’ fraud

[snip]

The men are accused by federal prosecutors of using hundreds of thousands of dollars donated to an online crowdfunding campaign called We Build the Wall for personal expenses, among other things.

Bannon, who pleaded not guilty and denied any wrongdoing, was pardoned by then-President Trump in his final days in office. The Manhattan district attorney’s office is investigating Bannon for the same conduct and whether it violated state law. The pardon only covered federal crimes.

Timothy Shea, a fourth man charged in the fundraising effort, has pleaded not guilty. Last month he indicated to the judge that he would plead guilty, but changed his mind and is set to go to trial next month.

Bannon and Kolfage promised donors that the campaign, which ultimately raised more than $25 million, was “a volunteer organization” and that “100% of the funds raised … will be used in the execution of our mission and purpose,” according to the indictment.

But instead, according to prosecutors, Bannon, through a nonprofit under his control, used more than $1 million from We Build the Wall to “secretly” pay Kolfage and cover hundreds of thousands of dollars in Bannon’s personal expenses.

The NYPost calls the men “fraudsters” in the headline and — in a caption to a Bannon photo — notes he “was involved in the swindling GoFundMe campaign.” To its credit, that may be the best summary of what happened.

It is, admittedly, difficult to get what happened legally into the story yet, much less in a headline. That’s because while Bannon’s acceptance of a pardon might be viewed as evidence of guilt, he has not himself admitted he cheated Trump’s supporters. Plus, he could still be at legal exposure himself. I noted in December when Bannon hired pardon broker Robert Costello that Bannon might still face NY State charges (in which prosecution his former co-defendants could testify against him). Even before Cy Vance left, he was pursuing that possibility.

Even ignoring the circumstances of Bannon’s pardon, this fraud goes to the core of Trump’s relationship with his followers. Bannon’s co-conspirator Kolfage admitted that he lied to donors, people so worked up over Trump’s fear-mongering over brown people that they donated their own money, in part so he could sustain his own posh lifestyle (something else the NYP with its emphasis on images highlighted). This scheme treated Trump’s enthusiastic supporters as targets to be cheated, rubes whose support for Trump could be easily exploited.

Steve Bannon sure understood the relationship Trump has with his supporters.

Now consider the circumstances of Bannon’s pardon.

Dustin Stockton and Jennifer Lawrence, who have shown a real willingness to testify to anyone who would listen, described how pardons for cheating Trump supporters were tied to a commitment to help Trump steal an election.

In December 2020, as the tour rolled around the country, Stockton and Lawrence say they got a call from Rep. Paul Gosar (R-Ariz.) and his chief of staff, Thomas Van Flein. According to Stockton, Van Flein claimed he and the congressman had just met with Trump, who was considering giving them a “blanket pardon” to address the “We Build the Wall” investigation.

“We were just in the Oval Office speaking about pardons and your names came up,” Van Flein allegedly said. Van Flein did not respond to a request for comment.

Gosar suggested the bus tour was helping Stockton and Lawrence build support for a pardon from the caucus and Trump. “Keep up the good work,” Gosar said, according to Stockton. “Everybody’s seen what you’re doing.”

The hypothetical pardon for the two of them was tied to helping Trump fool his supporters into believing he was cheated out of a victory he had won. Stockton and Lawrence didn’t end up getting such a pardon (thus far, they haven’t needed one).

But Bannon — who played an as-yet unexplained role in convincing thousands of Trump supporters to commit crimes in service of this fraud — did get his pardon.

This fraud — where Trump allowed close associates to cheat his supporters, only to have Trump selectively pardon the single important person accused in the fraud in seeming exchange for his role in an even bigger fraud — perfectly captures Trump’s parasitic relationship with the cult he has created. It’s a pyramid scheme of abuse in which, thus far, the little guys at the bottom are the ones who pay the biggest price.

Trump not only doesn’t care that these people cheated his supporters, he’s willing to reward Bannon for helping him cheat them on still grander scale.

How we describe this pyramid scheme of abuse going forward is an important measure of the press’ ability to capture how Trump works. Thus far, Trump supporters have never rebelled against being used and cheated like this. Instead, they double down on their belief that Trump is the victim, rather than the con man victimizing them.

But yesterday, Brian Kolfage admitted that Trump supporters are the victims.

44, 40, and 38

[NB: Check the byline, thanks. /~Rayne]

It should be absolutely crystal clear the language used by Individual-1 in reference to these persons aged 44, 40, and 38 is pure propaganda.

(source: Wikipedia.org)

These are graduates of pricey universities who are old enough to have adult children. One of them was an advisor to the former White House occupant.

They may be the progeny, descendants, and heirs of Donald J. Trump but they are not juveniles, youngsters, or children.

His reference to Donald Jr., Ivanka, and Eric as children is subtly racist as well, because in 1989 Trump would never have referred to these persons:

Kevin Richardson, 14
Antron McCray, 15
Raymond Santana,14
Korey Wise, 16
Yusef Salaam, 15

as children.

Yes, racist, though Trump is hardly the first and only to use the white supremacist convention which allows any white adult with a living parent to be called a child while Black persons of any age are labeled in terms which erase any any and all innocence no matter the situation.

Innocence is exactly what Trump wants to convey and it’s fallacious bullshit.

Trump will continue to spew this manipulative crap to skew the public’s sentiment, but every bit of it must be rejected and set straight with the truth.

All three of these adults and their father have been subpoenaed by the New York Attorney General in relation to an investigation into the Trump Organization’s use of fraudulent and misleading asset valuations to obtain economic benefits.

This is hardly the stuff of children who can’t knowingly enter contracts. The NYAG’s brief profiles of Trump’s adult progeny describe people who are quite capable of managing contracts:

Donald Trump, Jr. runs the Trump Organization with Eric Trump. He is also a trustee of the Donald J. Trump Revocable Trust and has certified annual financial statements regarding the assets the Trust holds for Donald J. Trump.

Ivanka Trump was the Executive Vice President for Development and Acquisitions of the Trump Organization through at least 2016. Among other responsibilities, Ms. Trump negotiated and secured financing for Trump Organization properties. Until January 2017, Ms. Trump was a primary contact for the Trump Organization’s largest lender, Deutsche Bank.

These are adults who need to cooperate with law enforcement because their father isn’t going to make this any better. He’s clearly not stepped up to respond to the subpoena and instead thrown “children” in front of the NYAG’s bus.

Drive for Show, Putt for Dough, Cheat for Tax Deductions

[NB: Check the byline, thanks. /~Rayne]

I swear every time I think I’ve met the limit of repulsion for Trump, I meet a new threshold.

You’re doubtless aware of the New York Attorney General’s Motion to Compel against The Trump Organization, Inc.; Seven Springs LLC; Allen Weisselberg; Eric Trump; Charles Martabano; Morgan, Lewis & Bockius LLP (MLB); Sheri Dillon; Donald J. Trump; Ivanka Trump; and Donald Trump, Jr. in relation to investigation of “fraudulent or misleading asset valuations to obtain a host of economic benefits, including loans, insurance coverage, and tax deductions.”

Martabano is a real estate attorney; MLB is a tax attorneys practice which sought to cut ties with Trump; Sheri Dillon has been a partner at MLB working on the Trump account. The rest of the named you are likely familiar with from previous news and posts.

This motion is only in relation to a civil action by NYAG Letitia James; the District Attorney of the County of New York (DANY) Alvin Bragg is conducting a parallel criminal investigation.

I’ve written before about Trump National Golf Club Westchester and the generally scammy and scummy way Trump and Trump org treated the community of Briarcliff where the course is located.

NYAG’s motion opened up a new can of angry bees from a location I haven’t looked at previously because it wasn’t a Trump golf course resort.

Seven Springs is an example of a golf course which didn’t happen, and what Trump did to try and keep the property while paying out as little as possible to do so.

This sounds relatively harmless; who doesn’t try to keep their expenses down?

Except Seven Springs is yet another example of Trump’s lousy judgment and his externalizing his failures onto others.

~ ~ ~

This is Seven Springs as it was back when it was owned by Eugene and Agnes Meyer (also known as the parents of Washington Post’s former publisher Katharine Graham née Meyer). It was built for the Meyers in 1915 for what then was an unfathomable amount of money – $2 million for a little over 28,000 square feet. (Note the rows of young trees planted at the top of the photo as well as the trees to the right side which follow the embankment to the Byram Lake Reservoir.)

(source: Histree.com)

Agnes Meyer died in 1970; under the successor Meyer Foundation, Seven Springs was then used as a conference center by Yale University. In 1984 the foundation cut its ties with Yale and gifted the property to Rockefeller University.

In 1995 – three years after his divorce from his first wife Ivana and a year before he bought the former Briar Hall Golf and Country Club in Westchester – Trump bought Seven Springs from Rockefeller University

Trump originally planned to develop the property into a golf course. A number of architectural design firms worked competitively on plans over a handful of years.

But nothing came of the effort for a number of reasons, the biggest barrier being the approval of the local community and his neighbors.

This is Seven Springs as it appears on Google Maps in satellite view. It is located almost half way between two golf courses – the Mt. Kisco Country Club (opened in 1928) and the Summit at Armonk (opened in 1961).

Mt. Kisco Country Club at upper left; the Summit at Armonk at lower right; Seven Springs in center to left of Byram Lake Reservoir. (source: Google Maps)

The addition of a Trump course at Seven Springs would mean three golf courses inside less than a 10-mile radius. Seven Springs is located on undulating terrain with granite underneath and wetlands on the property, making development extremely complicated and pricey.

Surface water from Seven Springs acreage drains into the Byram Lake Reservoir which provides drinking water for the Mt. Kisco community; a new golf course with all its lawn chemicals and additional automobile traffic dropping gasoline, oil, and more would increase pollutants in the reservoir. One can understand the community’s reluctance to approve a Trump course when there has already been one nearby for decades; the community knows just how much a golf course can affect the reservoir.

The property also abuts the Eugene and Agnes E. Meyer Nature Preserve immediately to the south which is owned by The Nature Conservancy. It is undeveloped woodlands overlooked by the 28,000 square foot house at Seven Springs.

~ ~ ~

This is what pissed me off.

Trump had to have known when he bought Seven Springs that the nature preserve which had once been part of the Meyers’ 1000-acre holding was next door to the immediate south of the estate. One of the tentative plans for a golf course snugged up to the north boundary of the preserve.

Once Trump finally gave up on this course after stringing along star-struck course developers for years, he decided he would pursue real estate development, tentatively subdividing Seven Springs to build up to 14 McMansion-sized homes.

But he apparently wanted or needed a through way across the 213 acres for both the purposes of development and for the future home owners.

He sued The Nature Conservancy and the community for an easement to build a road — extending Oregon Road which leads to Seven Springs along the drive on the property and then through the nature preserve over an unpaved path to where Oregon Road begins again south of the preserve.

Again, Trump had to have known when he bought the 213-acre parcel that it did not include an easement into/through the nature preserve. An unpaved path from Seven Springs into the preserve once existed, but a gate had been installed in 1990 between Seven Springs and the preserve. Rockefeller University had known about a previous easement but allowed it to expire during its ownership of Seven Springs.

The easement was extinct, demised, non-extant, and even more dead because Trump had allowed more than 10 years to pass between purchasing Seven Springs and suing for an easement.

And yet in August 2006 Trump went to court to get his way, costing The Nature Conservancy and the community time and money to fight off his demand for an easement and road through pristine woodlands because he didn’t have the goddamned foresight to see the Seven Springs property was problematic as golf course and residential development when he bought it in 1995.

Never mind the fact the course would be in competition with two well-established courses.

~ ~ ~

Now it gets messy.

Because he can’t develop the property at all without some accommodation for a road and the neighbors and community aren’t happy but he wants to hang onto the property for his family’s use, Trump pursued tax deductions.

It’s not clear from the NYAG’s motion when Trump began pursuit of a tax deduction for a 150-acre conservation easement on Seven Springs property. In exchange for promising not to develop property, Trump’s organization obtained a $5 million tax credit from 2014 to 2018 for Seven Springs and Trump National Golf Club Los Angeles combined.

He also pursued a very similar conservation easement tax deduction at Trump National Golf Club Los Angeles worth multiple millions in tax credits. The land set aside from development was used as a driving range – no buildings constructed, no fairways or greens, just a patch of mowed lawn for practice shots but still part of the golf course business, and surely not open to the public for free. This tax deduction, too, is being examined by NYAG.

Which part of the 213-acre Seven Springs property did he set aside to conserve?

The part which had been cleared of trees planted by the Meyers?

The part which has been cleared of trees and brushed out down the slope to the Byram Lake Reservoir, which realistically can’t be developed anyhow because of that slope?

The part which couldn’t be developed because of the lack of local approvals and the road he couldn’t add?

MOUNT KISCO, NY – SEPTEMBER 30 2020: President Trump’s Seven Springs estate in Mount Kisco, New York, seen here Sept. 30, 2020.
(Johnny Milano for The Washington Post)

Which is the question at the heart of NYAG’s investigation into Seven Springs: how can Trump place a value on the 150-acre conservation easement for a tax deduction based on high-end residential development, when it couldn’t be developed?

How can a permanent swath of lawn punctuated with trees be the same value as new McMansion construction?

It’s not worth roughly $2-3 million a year in tax deductions on the face of it.

~ ~ ~

Another really irritating part of this beyond the pudgy orange weasel himself is the absence of the Internal Revenue Service and the New York State Department of Taxation and Finance. How did this scofflaw get away with millions of dollars in sketchy tax deductions all this time?

This situation should never have gotten this far out of hand; the first time a taxpayer, human or corporate, takes multi-million tax deductions on conservation easements, that’s the time an agent from either the IRS or the state tax authority physically inspects the property and investigates its backstory to ensure it’s a legitimate conservation easement.

But like everything else Trump has gotten away with so far, the right authorities to deal with him at the time he violated a law or regulation failed to do their duty and the public has no idea why.

If I took a multi-million tax deduction on a conservation easement this year, you can bet I’d be sucked into an audit as fast as you can blink.

Once NYAG and DANY are done with their investigations, local, state, and federal governments need to look at what triggers should set off audits and investigations because whatever they’re currently relying on isn’t working.

$2-3 million is one hell of a lot of tax revenue which could have paid for many public services in New York State and beyond.

And I haven’t even mentioned the other Trump properties in New York though I’ve written about them before.

Nor have I mentioned the easement lawsuit and the creation of conservation easements for tax purposes occurred while Trump was appearing in The Apprentice, kitted out and scripted to look as if he was a successful, honest businessman and real estate developer season after season.

~ ~ ~

Eric Trump, he of 500-plus invocations of the Fifth Amendment under questioning by NYAG, said of Seven Springs, “It was home base for us for a long, long time…

Yeah? Well, all your base are belong to us if Seven Springs ends up seized for taxes.

Seriously, fuck this base.

Not-So-Casual Water: Insurance Fraud Alleged at Trump-Westchester

[NB: Check the byline, thanks. /~Rayne]

Hope you were able to get out on the links this weekend if you’re a golfer and your local weather was good. The season here in Michigan is wrapping up this week or next from the looks of things.

Wonder when the course will close at Trump National Golf Club Westchester this year, if it hasn’t already?

Rolling Stone published another piece about the course; this time ex-employees dished about insurance claims made related to flooding at the course in 2011.

Recall that Trump reported in FEC financial filings that Westchester was worth an estimated $50 million.

Trump org fought with the local tax authority, insisting the course should have an assessed value of $1.4 million — much lower than the fire sale price of $7.5 million Trump paid for the course in 1996 when it went into foreclosure.

But the former insiders said Trump org claimed a loss of $1.3 million due to flooding in 2011.

There’s no indication at all that the golf course’s business was disrupted by the flooding, which one might think was likely if half or more of the course had been so badly damaged.

The local municipality sued Trump because of damage caused by changes to his course which disturbed water flows. It’s pretty obvious from a Google Maps terrain view that the water flows toward the municipality of Briarcliff from the Trump course so Trump and his organization can’t say they couldn’t have anticipated a problem in the event of heavy rains.

That top red arrow points to the area nearest the intersection of Pleasantville Road (Nw to SE, east side of course) and State Road (ends at Pleasantville Road, runs NE to SW). Google Streetview images show the street surface on State Road near the intersection has been repaired and worked over at some point since 2009.

If you’re just Joe Duffer out on the course, you can see the manufactured water features — specifically two waterfalls denoted by red arrows — which must rely on water level being artificially maintained along with drainage in case of overflow. The creek and wash area have two feature cart bridges over them under which excess water should flow east in the direction of the red arrow. The waterfalls aren’t attractive unless the water is kept up high which means any extra water from surfaces like parking lots and fairways draining toward the pond will overflow rapidly into a wash which ends…????


Somewhere under Pleasantville Road I hope there’s a big drain.

On the east side of Pleasantville Road is the Walter M. Law Park and the Briarcliff Manor Public Library. The park includes tennis courts, a swimming pool, a baseball diamond, and a pond which looks like it might be fed from water coming from under Pleasantville Road.

In 2011, floodwaters damaged the park area, causing heartburn for the local municipality:

The dispute began not long after a series of storms on June 23, 2011, dumped 5 inches of rain on the region. Waters swamped the village’s Law Memorial Park swimming pool and deposited silt about a third of a mile from the course, next to the Briarcliff Manor Public Library. Also flooded were the playing fields behind the swimming pool, where a geyser gushed from a manhole whose cover popped up from the drainage system blockage.

Briarcliff Manor met with Trump org several times about the damage and reparation. After hashing over the problem fruitlessly it billed Trump org $238,000 for the damage done because Trump’s course had made “unauthorized alterations” to the watercourse which elevated the waterfall ponds’ levels by up to six feet. Trump org denied doing anything to cause the problem, leaning into the argument that the rain was an unanticipated 300-year flood event.

Neighbors of the golf course were further upset by Trump’s balking at the property value assessment when Trump org argued the course owed only $47,000 and not $470,000 based on the much lower property value of less than $2 million.

That lower property tax amount is audacious considering Trump’s financial henchman Alan Garten claimed the flooding of the public park occurred because “…a drainage pipe under the village fields was clogged. It was clogged because the village [Briarcliff Manor] was too cheap to put up a grate to prevent rocks and boulders from coming in.”

(Where would the money come from, Garten? Tax revenues?)

What was it, then, the Trump org claimed against its insurance coverage compared to what they paid? Were the claims under investigation in relation to the 2011 flooding? Were they also in relation to more recent flooding due to high water levels from Hurricane Ida in August this year?

Or were there other claims we don’t know about yet?

What were the real terms of the settlement Trump org made with the local taxing authority, the Ossining Board of Assessment Review, when the Rolling Stone said,

The Trump Organization ultimately paid the town $50,000 to settle the lawsuit but, under the terms of the settlement, did not admit any wrongdoing, according to a copy of the settlement obtained in a request made under New York’s Freedom of Information Law. The settlement came on July 12, 2016, a few days before Trump accepted the Republican nomination for president.

50 grand seems suspiciously light when the engineering analysis to assess the problem and determine a solution likely cost the municipality more than that amount.

The timing is even more suspicious — how convenient the problem was resolved right then, before Trump’s campaign began in earnest.

The specifics of the agreement remain a mystery which seems to be par for this course and Trump’s organization.

What Lies Beneath the Turf

[NB: check the byline, thanks! /~Rayne]

We learned this past week that the Westchester County, NY district attorney is investigating the Trump National Golf Club Westchester.

… The full scope of the investigation could not be determined, but the district attorney, Mimi E. Rocah, appears to be focused at least in part on whether Mr. Trump’s company, the Trump Organization, misled local officials about the property’s value to reduce its taxes, one of the people said. …

While in the White House Trump declared on mandatory financial disclosure statements the Westchester golf course was worth $50 million; however the Trump org claimed the 140-acre property with its 75,000 square foot clubhouse was worth only $1.4 million for local tax purposes.

For comparison, nearby residential homes (currently listed for sale) are assessed at much higher rates:

Home A, 1.12 acres, listed at $1.5M, assessed at $1.03M ($2543/month taxes)
Home B, 2.75 acres, listed at $2.3M, assessed at $1.4M ($3768/month taxes)
Home C, 3.52 acres, listed at $2.7M, assessed at $2.5M ($4,400/month taxes)

While there may be some rationale for a commercial property assessed at such ridiculously low value compared to these residential properties within walking distance, it doesn’t make sense when golf courses are being converted to residential property during a contraction of the golf industry, and when the municipality and neighbors have had a history of sewer and drainage problems caused by the golf course, resulting in damage to individual and community property.

The gap between the local tax assessment and the financial report valuation has been known for years now, noted well before Election Day 2016.

The possibility of tax and insurance fraud by the Trump organization has been clear for years now as well, in no small part because of testimony before the House Oversight Committee in February 2019 by Trump’s former attorney, Michael Cohen (beginning at 4:43:30):

Transcript:

Ms. Ocasio-Cortez: OK. Thank you.
Second, I want to ask a little bit about your conversation with my colleague from Missouri about asset inflation. To your knowledge, did the President ever provide inflated assets to an insurance company?
Mr. Cohen: Yes.
Ms. Ocasio-Cortez: Who else knows that the President did this?
Mr. Cohen: Allen Weisselberg, Ron Lieberman, and Matthew Calamari.
Ms. Ocasio-Cortez: And where would the committee find more information on this? Do you think we need to review his financial statements and his tax returns in order to compare them?
Mr. Cohen: Yes, and you would find it at The Trump Org.
Ms. Ocasio-Cortez: Thank you very much.
The last thing here. The Trump Golf organization currently has a golf course in my home borough of the Bronx, Trump Links. I drive past it every day going between The Bronx and Queens. In fact, The Washington Post reported on the Trump Links Bronx course in an article entitled “Taxpayers Built This New York Golf Course and Trump Reaps the Rewards.”
That article is where many New Yorkers and people in the country learned that taxpayers spent $127 million to build Trump Links in a, quote, “generous deal allowing President Trump to keep almost every dollar that flows in on a golf course built with public funds.” And this doesn’t seem to be the only time the President has benefited at the expense of the public.
Mr. Cohen, I want to ask you about your assertion that the President may have improperly devalued his assets to avoid paying taxes. According to an August 21, 2016, report by The Washington Post, while the President claimed in financial disclosure forms that Trump National Golf Club in Jupiter, Florida, was worth more than $50 million, he had reported otherwise to local tax authorities that the course was worth, quote, “no more than $5 million.”
Mr. Cohen, do you know whether this specific report is accurate?
Mr. Cohen: It’s identical to what he did at Trump National Golf Club at Briar Cliff Manor.
Ms. Ocasio-Cortez: To your knowledge, was the President interested in reducing his local real estate bills, tax bills?
Mr. Cohen: Yes.
Ms. Ocasio-Cortez: And how did he do that?
Mr. Cohen: What you do is you deflate the value of the asset, and then you put in a request to the tax department for a deduction.
Ms. Ocasio-Cortez: Thank you.
Now, in October 2018, The New York Times revealed that, quote, “President Trump participated in dubious tax schemes during the 1990’s, including instances of outright fraud that greatly increased the fortune he received from his parents.” It further stated for Mr. Trump, quote,  “He also helped formulate a strategy to undervalue his parents’ real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing his tax bill when those properties were transferred to him and his siblings.”
Mr. Cohen, do you know whether that specific report is accurate?
Mr. Cohen: I don’t. I wasn’t there in the 1990’s.
Ms. Ocasio-Cortez: Who would know the answer to those questions?
Mr. Cohen: Allen Weisselberg.
Ms. Ocasio-Cortez: And would it help for the committee to obtain Federal and State tax returns from the President and his company to address that discrepancy?
Mr. Cohen: I believe so.
Ms. Ocasio-Cortez: Thank you very much. I yield the rest of my time to the chair.

Here’s the rub: Trump’s dispute with local tax authorities in Westchester County, NY and the disparity in its property valuation goes back more than five years; this is publicly known, amply reported, even discussed here at emptywheel.

Why is it only after the August 2021 election of a new district attorney, Mimi Rocah, took office was the possibility of tax and insurance fraud finally investigated?

The Westchester course is only one of 11 in the U.S., though. They include:

Trump National Golf Club, Bedminster, NJ
Trump National Golf Club, Charlotte, NC
Trump National Golf Club, Colts Neck, NJ
Trump National Golf Club, Hudson Valley, NY
Trump National Golf Club, Jupiter, FL
Trump National Golf Club, Los Angeles, CA
Trump National Doral Golf Club, Miami, FL
Trump International Golf Club, West Palm Beach, FL
Trump National Golf Club, Pine Hill, NJ
Trump National Golf Club, Washington, DC

In reports to the Federal Election Commission, Trump reported more than half of these were worth $50 million or more while regularly suing the snot out of local tax authorities who dared to assess Trump golf courses for values higher than a million or two.

Again, this has been known and reported for years. Trump has and continues to treat every real estate asset as it were the reason for a SLAPP-type suit to cow government to his demands. It’s a pattern.

Why have the local, state, or federal governments failed to investigate these courses in the same way Westchester County is now investigating Trump National Golf Club Westchester?

Especially after Michael Cohen not only testified that golf courses came up as a means to launder payments to Stormy Daniels, and that asset valuations were skewed artificially to reduce Trump’s insurance premiums? It’s not as if there hasn’t been adequate reason to investigate this pattern of deflated asset valuations.

It’s been more than two and a half years since Michael Cohen testified before the House Oversight Committee that the Trump org reported deflated assets to reduce tax exposure while making false statements to the FEC and the public about golf course market value.

How many more years will pass before another domestic Trump golf course is investigated?

Judge Paul Oetken Eliminates Lev Parnas’ Last Attempt to Weaponize the Former President’s Former Lawyer in His Defense

Yesterday, Judge Paul Oetken ruled on all but one of the pre-trial motions in the Lev Parnas trial(s). The rulings have the effect of neutralizing any benefit that Parnas might have tried to get from his association with the former President’s former lawyer, Rudy Giuliani. But the order also appears against the background of the Special Master review in Rudy’s own case in interesting ways, and in ways that might change Parnas’ incentives.

The only request that Oetken granted was a request to sever the campaign finance charges — what Oetken describes as the Straw Donor scheme (funneling money to pro-Trump entities) and the Foreign Donor scheme (funneling Russian money to pro-marijuana politicians).

The “Straw Donor Scheme” (Parnas and [Igor] Fruman): First, the Government alleges that Parnas and Fruman conspired in 2018 to disguise and falsely report the source of donations to political action committees and campaigns, thereby evading federal contribution limits, in order to promote their nascent energy business venture and boost Parnas’s profile.

The “Foreign Donor Scheme” (Parnas, Fruman, and [Andrey] Kukushkin): During the same time period, Parnas and Fruman were working with Kukushkin on a separate business venture: a nascent cannabis business. Among their activities was making political contributions to candidates in states where they intended to seek licenses to operate a cannabis business. The Government alleges that Parnas, Fruman, and Kukushkin conspired to disguise a one-million-dollar contribution from a Russian national to evade the prohibition on political contributions from foreign nationals.

Oetken will sever those charges from the Fraud Guarantee charges, which currently involve only Parnas (and in which David Correia already pled guilty and cooperated with the government).

The “Fraud Guarantee Scheme” (Parnas): Parnas was also working with David Correia on pitching another business venture to be called “Fraud Guarantee.” The Government alleges that Parnas and Correia defrauded several investors in Fraud Guarantee by making material misrepresentations to them, including about the business’s funding and how its funds were being used.

That puts the trial involving Rudy, in which only Parnas is currently charged, after the non-Rudy trial, which is due to start on October 4.

Then, in two steps, Oetken denied Parnas’ bid to claim to 1) get access to Rudy and Victoria Toensing’s seized content to prove that 2) he was selectively prosecuted to protect the former President. Mind you, Parnas requested those in reverse order (indeed, in its response to Parnas on the selective prosecution claim, the government claimed that some of what he was asking for might be privileged). So Oetken denied those requests in order, first by ruling that Parnas hadn’t provided proof of either basis to claim selective prosecution, that he was discriminated against or that it was done out of some discriminatory purpose.

Parnas does not meet either required prong. Regarding discriminatory effect, Parnas fails to show that others who are similarly situated have not been prosecuted. This requires showing that individuals outside the protected class committed roughly the same crime in roughly the same circumstances but were not prosecuted. See United States v. Lewis, 517 F.3d 20, 27 (1st Cir. 2008). However, individuals similarly situated to Parnas were prosecuted along with Parnas, including two who share his national origin (Fruman and Kukushkin) and one (Correia) who does not. Moreover, while Parnas was subject to a Congressional demand for information at the time of his arrest, Fruman was as well, and while Parnas complied with that demand several months later, Fruman did not.

Regarding discriminatory purpose, Parnas’s argument is not just speculative, but implausible. Citing Twitter posts, Parnas argues that “[m]illions of Americans already believe that [former] Attorney General Barr may have interfered in some aspect of Mr. Parnas’s investigation and prosecution, based on the public record.” Parnas asserts that his indictment and arrest were a means to thwart Parnas’s testimony in the impeachment inquiry of former President Donald Trump. But the theorizing of Twitters users, and Parnas’s own speculation, do not constitute evidence of an improperly motivated prosecution. Indeed, Parnas was, by his own admission, not cooperating with the Congressional demand as of the day of his indictment. To accept Parnas’s conspiracy theory, the Government would have to have known that, one day in the future, Parnas would change his mind and decide to cooperate with the Congressional demand. Furthermore, the Government’s conduct since Parnas’s arrest undermines his theory. The Government consented to allowing Parnas to produce documents to the House impeachment committee, and it has not objected to Parnas’s media interviews and television appearances.

It’s actually not a conspiracy theory that Parnas was prosecuted in the way he was partly as an attempt to shut him up, though when Parnas first argued this, he claimed he was prosecuted to prevent him from testifying in the Former’s first impeachment which, as Oetken notes (and I noted in the past) doesn’t accord with the known facts. And Parnas chose not to present some of the most damning evidence of this, probably because it would incriminate himself.

In any case, having denied Parnas’ selective prosecution claim, in the very next section, Oetken denies Parnas’ request (in which the other defendants joined) to get access to the Rudy-Toensing content, citing his decision rejecting Parnas’ selective prosecution claim.

The Giuliani and Toensing warrants do not authorize the Government to search for evidence related to this case, nor do any of the accounts or devices involved belong to Defendants. The Government represents that it will not use any of the evidence seized pursuant to these warrants at trial in this case. Thus, the only bases for discovery of these materials would be (1) if they contain statements by Defendants that are “relevant” to the charges in this case, or (2) if they are “material” to preparing a defense to the Government’s case.

First, Defendants contend that the search warrant returns are likely to contain communications between Giuliani and Toensing and Parnas. But such communications are likely to have already been produced from Parnas’s and Fruman’s own accounts and devices, and Defendants have not shown that they are related to the charged case, material, and noncumulative.

Second, Parnas suggests that the warrant returns may contain evidence relevant to his selective prosecution claim. The Court has already rejected that claim, and nothing in Parnas’s letter alters the fact that Parnas has failed to make the requisite showing for such a claim.

This is unsurprising on a matter of law, but several points about it are worth closer focus: First, Oetken notes that the government can only access that information seized from Rudy and Toensing that relates to the crimes for which probable cause was laid out in the warrants, that is, Rudy’s influence-peddling, which also implicates Parnas. By description, those warrants do not include any claim that Rudy, with Parnas, attempted to obstruct the impeachment inquiry by hiding details of the influence-peddling scheme. So the warrants would not have provided access to the content of most interest to Parnas, content he’s pretty sure exists or existed.

Oetken is silent about whether any warrants have been obtained since the government finally got access to the first tranche of material seized in 2019.

Oetken then claims that if useful communications existed, they would not have been turned over in the warrant returns served on Parnas and Fruman’s own devices, because those warrants obtained permission for evidence of different crimes. Except there’s very good reason to believe that’s not true: that’s because, by October 21, 2019, the government and Oetken both know, Parnas attempted to delete his own iCloud account. Parnas did not succeed in that attempt — the government had already gotten a preservation order with Apple. But that doesn’t mean there isn’t some other content he once had that he thinks Rudy or Toensing may have retained. Indeed, in his request for the information, Parnas asserted the information seized from Rudy and Toensing likely included conversations — conversations that may have been deleted — about how to address their prior relationships and the unfolding investigation.

The seized evidence will also likely contain a number and variety of communications between Giuliani and Toensing and Parnas that are directly discoverable under Fed. R. Crim. P. 16, evidence of any conversations between Giuliani, Toensing, and others, including Parnas, that may have been deleted, communications between Giuliani, Toensing and others about the defendants and how to address their prior relationships, the arrests, and the unfolding investigation.

Those materials might help Parnas describe why John Dowd attempted to assert an interlocked attorney-client relationship that ultimately put the then-President in a joint defense agreement with at least one pretty sketchy Ukrainian, which in turn might explain how this investigation proceeded as it did (including why it didn’t expand into Rudy’s dalliance with a different Ukrainian agent of Russia). But Parnas as much as describes it as an obstruction attempt — an obstruction attempt he, when he attempted to delete his own iCloud account, would have been a part of before he wasn’t a part of it anymore. Given Rudy’s  descriptions of the crimes covered by the warrants, that attempt was not a part of the warrants originally obtained on Rudy and Toensing in 2019, and it wasn’t a part of the warrants obtained in April, but given the new evidence (Parnas’ own declaration), and given that Jeffrey Rosen is no longer around to obstruct investigations into the Former, SDNY (or EDNY) could ask for new warrants for permission to search for evidence of that crime.

If SDNY asked for such warrants, Oetken would have been the one they would ask.

Meanwhile, a month after Special Master Barbara Jones first described how she would proceed in reviewing Rudy and Toensing’s seized materials, including her promise to, “provide the Court with a timeline for concluding the privilege review once she better understands the volume of the materials to be reviewed,” she has made no public reports. Given the pace at which she worked to review Michael Cohen’s content in 2018, in which her first report was issued 38 days after she was appointed, we should expect a report from her in the near future (the same 38 days would have been July 13, though COVID has slowed everything down).

Meanwhile, yesterday’s ruling took a curious approach to privilege issues. One thing Kukushkin complained about was that, by choosing to share information with the impeachment inquiry, Parnas shared information in which they had an attorney-client privilege. Oetken dismissed this concern (and Kukushkin’s larger bid to sever his trial from Parnas’) in part by relying on prosecutors’ representation that they would not rely on privileged material

Kukushkin also argues that because Parnas waived the attorney-client privilege by providing certain materials to Congress, the Government may be able to introduce privileged materials against Parnas, prejudicing Kukushkin. This argument is speculative, and the Government disavows any intent to seek to offer privileged materials.

Finally, all the defendants complained that a key email used against them in the superseding indictment was privileged, and argued that that, plus all fruit of that (a number of other search warrants), should be thrown out.

Defendants assert that an email, quoted in several search warrant applications, is protected by the attorney-client privilege and that, as a result, the returns from the search warrants should be suppressed and the Superseding Indictment itself should be dismissed. This issue will be addressed in a separate opinion and order.

This is a different attorney-client dispute, not the claims of privilege that John Dowd invented to protect a cover-up in 2019. The government argued that it was not privileged, but even if it were it would be covered by the crime-fraud exception. “[T]he crime-fraud exception applies because the email furthered a criminal effort by the defendants to utilize attorneys to structure a new business to conceal the involvement of a foreign national.” But Oetken, who presumably approved of those allegedly poisoned fruit warrants like he approved of the warrants against Rudy and Toensing, has deferred it to a separate opinion.

Oetken knows far more about the substance of these attorney-client disputes, and this is actually the third attempt in this case where a defendant attempted to hide evidence by invoking privilege. In the third, prosecutors successfully argued that materials pre-existing attorney-client privilege are not privileged.

But given all these claims of attorney-client privilege he has been watching, it’s likely he’s unimpressed with the third one.

Why Would Allen Weisselberg Tolerate Having to Cheat on His Taxes Rather than Getting a Raise?

I want to pull several salient facts out of the indictment against Trump Organization CFO Allen Weisselberg and Trump Organization rolled out yesterday. The indictment alleges that the Trump Organization paid Weisselberg and other Trump Org executives off the books in such a way that allowed them to underpay their taxes.

The purpose of the scheme was to compensate Weisselberg and other Trump Organization executives in a manner that was “off the books”: the beneficiaries of the scheme received substantial portions of their income through indirect and disguised means, with compensation that was unreported or misreported by the Trump Corporation or Trump Payroll Corp. to the tax authorities. The scheme was intended to allow certain employees to substantially understate their compensation from the Trump Organization, so that they could and did pay federal, state, and local taxes in amounts that were significantly less than the amounts that should have been paid. The scheme also enabled Weisselberg to obtain tax refunds of amounts previously withheld.

It goes through one after another way that Weisselberg was paid in this way:

  • A lease on a Riverside apartment that was Weisselberg’s full time residence (which, scandalously, was not owned by Trump)
  • For some years in which he lived in the Riverside apartment, the ability to claim he was not a resident of New York City and so avoid taxes there
  • Private school tuition payments for his grand-kids
  • Use of two Mercedes
  • Cash to pay his holiday gratuities
  • Some compensation paid by the Mar-a-Lago Club and Wollman Rink Operations LLC as non-employee compensation that he dumped into a Keogh plan (this appears to be the same scheme that the NYT described Ivanka being paid as a consultant under)

It makes it clear he was in charge of this system — the entire system, just not the part that benefitted him, but also the parts that benefitted his own kid and Donald Trump’s kids.

At all relevant times, Weisselberg had authority over the Trump Organization’s accounting functions, including its payroll administration procedures. He supervised the Comptroller of the Trump Organization, who managed the day-to-day affairs of the accounting department, including payroll administration, and who reported to Weisselberg. At all relevant times, Weisselberg was authorized to act on behalf of the Trump Corporation and Trump Payroll Corp, to formulate corporate policy, and to supervise subordinate employees in a managerial capacity.

Thus far I get how this is supposed to work: Weisselberg has thus far been charged only for the tax fraud that benefitted him. If he doesn’t cooperate, his kid will be charged for the tax fraud that benefitted him, and Weisselberg will also be charged for the tax fraud that didn’t benefit him but over which he was in charge anyway.

What I don’t understand is this. Before the indictment was revealed, some well-informed people had assumed that all the fringe benefits — the free tuition, the free car, the free apartment, the free tips — were on top of Weisselberg’s compensation. But they weren’t. The indictment reveals that from 2011 to 2018, Weisselberg’s compensation remained fixed at $940,000, with $540,000 in base and $400,000 in bonuses that could be paid via one or another of these slushy tax dodges.

For example, from 2011 through 2018, his compensation was fixed at $940,000, to be comprised of $540,000 in base salary and $400,000 in end-of-year bonus. However, at Weisselberg’s direction, the Trump Organization excluded from his reported gross income the amounts that were paid to him indirectly in the form of rent paid on his New York City apartment, tuition paid on his behalf to his family members” private school, the automobile expenses paid in connection with his and his wife’s personal cars, and the other items described above. Weisselberg, received the benefit of these payments, and the Trump Organization internally tracked and treated ‘many of them as part of his authorized annual compensation, ensuring that he was not paid more than his pre-authorized, fixed amount of gross compensation. However, the corporate defendants falsified other compensation records so that the indirect compensation payments were not reflected in Weisselberg’s reported gross income. Therefore, the W-2 forms and other compensation records reported to federal, state, and local tax authorities fraudulently understated the income that the ‘Trump Organization had paid Weisselberg. Weisselberg included the falsified information set forth on his W-2 forms when he filed his personal income tax returns.

So while the benefit to Weisselberg of all this alleged tax cheating was $1.76 million, he really wasn’t pocketing all that as a result (probably no more than $100,000 benefit per year). Effectively, the Federal Government, New York State and New York City were paying Weisselberg’s raises every year rather than Donald Trump — with one notable exception, explained below.

Here’s how it looks with each benefit over the years that Weisselberg received that benefit.

The table suggests two things (though someone smarter than me would have to do the math to prove it). First, starting in 2013, after he sold his house on Long Island, Weisselberg lost a significant tax dodge, the ability to claim he didn’t live in NYC, so at that point, his compensation would have effectively been cut $23,000 in the yearly tax dodge not paying NYC taxes had given him to that point. Then, in the period when Donald Trump was too cheap (or, importantly, too broke) to just give Weisselberg a raise like normal people, Weisselberg was just adding on the tax dodges: first, the paltry holiday gratuities, then the 1099 payments and the tuition payments.

In that period — which stretched roughly from the period when Trump first entertained running for President through his first year as president — Weisselberg was doing more and more tax cheating just to get paid the same (or adding roughly $100,000 a year income in the best scenario, but again, someone smarter than me needs to do that math).

And for at least two years, Trump didn’t even benefit from this scheme. For the first two years Trump Organization was paying Weisselberg’s grand-kids’ tuition, he was paying it out of his own pocket.

Beginning in 2012, one of Weisselberg’s family members began attending a private school in Manhattan. Beginning in 2014, second Weisselberg family member began attending the same private school. From 2012 through 2017, and as part of the scheme to defraud, Trump Corporation personnel, including Weisselberg, arranged for tuition expenses for Weisselberg’s family members to be paid by personal checks drawn on the account of and signed by Donald J. ‘Trump, and later drawn on the account of the Donald J. Trump Revocable Trust dated April 7, 2014.

As far as we know, Donald Trump has only made this kind of payment out of his own pocket when trying to buy off former sex partners. But for two years, he was paying part of Weisselberg’s compensation — the tuition of one grand-kid — out of his own pocket.

What I don’t understand is why — aside from loyalty — Weisselberg was allegedly willing to commit new kinds of tax fraud just to retain the same salary. Michael Cohen went along with these kinds of games, but when it came time, he tried (unsuccessfully) to cash in on all his years of being a loyal Trump crook. Did Weisselberg take on all this legal exposure out of loyalty?

Or was there something about Trump’s business that required them to squeeze more and more out of unpaid taxes just to stay afloat?

Update: This piece from Jennifer Taub is one of the most helpful pieces I’ve seen on why this was valuable for Trump.

It’s easy to see what was in it for Weisselberg and the employees getting the equivalent of tax-free income. But how would Trump and his businesses benefit from these give-a-ways? It’s a way to give employees higher pay at a lower cost to the company. Here’s a simple, but not precise example for a New York employee. If the company pays an extra $100,000 in cash compensation the net pay for that extra is around $72,000 after withholding and payroll taxes. Then the employee can use that money to pay expenses like private school tuition or car leases. But, if instead, the company directly pays $72,000 worth of the employee’s school and car expenses off-the-books, and the employee and company hide that, it only costs the company the $72,000 (which it can still finagle a deduction as some kind of business expense).

By hiding that fringe benefit income, by pretending that he was not a New York City resident, and by claiming tax refunds to which he was not entitled, as the indictment alleges, he deprived city, state, and federal tax authorities of approximately $1,034,236 all together. A large sum, to be sure, but one that’s probably already been or soon will be dwarfed by Weisselberg’s legal bills. Weisselberg allegedly owes more than half of that cool million in federal taxes.

She also notes that Trump knew about the apartment.

There is a section of the indictment accusing Trump Corporation, Trump Payroll Corp., and Weisselberg with conspiracy in the fourth degree. Allegedly they agreed with “Unindicted Co-conspirator #1” (who appears to be someone who works for Weisselberg (so it’s not The Donald) to implement the off-the-books compensation scheme. This part of the indictment goes on to enumerate twelve separate overt acts that were carried out by the conspirators in furtherance of the conspiracy.

[snip]

The very first overt act that seems to indicate the ex-president’s involvement was Donald Trump on behalf of the corporation entering into a lease around March 31, 2005 for an apartment in Manhattan on Riverside Boulevard (the Trump Place building). That lease had a rider that permitted only Allen Weisselberg and his wife to occupy the apartment and to use it as their primary residence.

Why is this lease rider important? Well, it communicates that the grand jury knows that Donald Trump knew Weisselberg was living in the apartment on the company’s dime. It also means that Manhattan District Attorney Cy Vance does not yet have enough evidence to bring to the grand jury to show probable cause that Trump was part of the underlying agreement that formed the conspiracy.

Lev Parnas’ Gamble: The Three Nested Investigations

As I noted the other day, Lev Parnas has inserted himself, along with his co-defendants, in the middle of the presumed Special Master review of Rudy Giuliani and Victoria Toensing’s seized devices. He’s doing so as part of a strategy he has pursued since shortly after he was arrested to either make his prosecution unsustainable for Donald Trump (that strategy has presumably failed) or to bring a whole lot of powerful people — possibly up to and including Trump — down with him. The Special Master review will be critical to this strategy, because it will determine whether material that might otherwise be deemed privileged can be reviewed by the Southern District of New York as evidence of a cover-up of crimes that Donald Trump committed.

In this post, I will lay out how there are two — and if Lev is successful, three — sets of crimes in question, each leading to the next.

1a, Conspiracy to donate money: 18 USC 371, 52 USC 30122, 18 USC 1001, 18 USC 1519 and 2, and 18 USC 371, 52 USC 30121.

The first set of crimes pertain to efforts by Parnas, Igor Fruman, and two co-defendants, to gain access to the Republican Party with donations prohibited by campaign finance law. They were first charged — as Parnas and Fruman were about to fly to Vienna to meet with Victor Shokin — on October 9, 2019. The charges relate to allegations that they used their company, Global Energy Partners, to launder money, including money provided by a foreigner, to donate to Trump-associated and other Republican candidates.

These charges almost certainly arose out of a complaint and then a follow-up by Campaign Legal Center.

The overall motive of these crimes, as described, was basically grift: to improve their connections to facilitate a fairly dodgy business proposition. One prong of the business, explicitly funded by a Russian businessman, involved funding recreational marijuana efforts.

But along the way, one of their alleged acts was to give Pete Sessions $20,000 in a way that associated that donation with an effort to get rid of Marie Yovanovitch, possibly on behalf of Yuri Lutsenko.

[T]hese contributions were made for the purpose of gaining influence with politicians so as to advance their own personal financial interests and the political interests of Ukrainian government officials, including at least one Ukranian government official with whom they were working. For example, in or about May and June 2018, PARNAS and FRUMAN committed to raise $20,000 or more for a then-sitting U.S. Congressman [Sessions],

[snip]

At and around the same time PARNAS and FREEMAN committed to raising those funds for [Sessions], PARNAS met with [Sessions] and sought [his] assistance in causing the U.S. Government to remove or recall the then-U.S. Ambassador to Ukraine.

1b, Conspiracy to donate money: 18 USC 371, 52 USC 30122, 18 USC 1001, 18 USC 1519 and 2, and 18 USC 371, 52 USC 30121, 18 USC 1349.

The campaign finance indictment was superseded on September 17, 2020 to add a fraud charge associated with Parnas and David Correia’s Fraud Guarantee, which literally was a fraud claiming to insure people against losses from fraud. They got a bunch of investors to invest in the business based on false representations, which Parnas (and to a lesser degree, David Correia) allegedly spent on his personal expenses. The superseding indictment took out the charge related to Yovanovitch.

Shortly after this superseding indictment, Correia flipped, entering into a plea agreement.

2, Foreign influence peddling: 22 USC §§612 and 618, 18 USC §951, 18 USC §2, and 18 USC §371

As you can see already, the first indictment against Parnas and Fruman pertained to an effort — to get Yovanovitch fired — that they were undertaking with Rudy Giuliani. And the superseding indictment adds fraud associated with the Fraud Guarantee they used Rudy’s name to help sell. So Rudy was bound to get dragged into this.

According to a letter submitted by Rudy Giuliani’s lawyer, he is being investigated for a bunch of influence-peddling crimes: FARA, acting as an unregistered Foreign Agent, abetting, and conspiracy.

This investigation may have come out of the way that the whistleblower complaint that launched Trump’s first impeachment magnified an OCCRP profile of Parnas and Fruman’s influence-peddling (which incorporated the profile), and the way that impeachment magnified the influence-peddling that Rudy and the grifters were involved with. The letter that failed to redact the targets of the warrants associated with Rudy listed two of the key players in the OCCRP profile, Yuri Lutsenko and Alexander Levin (Roman Nasirov is the one other person, in addition to Rudy and Victoria Toensing, who was targeted).

Indeed, even as impeachment was rolling out, during the period where Parnas was discussing cooperating with SDNY, he was refusing to admit that some foreigner — likely Lutsenko — was behind all this.

And it seems pretty clear that Parnas and Fruman are subjects of this investigation, too. The government’s response to Parnas’ request for discovery describes that he was notified of search warrants targeting him in January of this year (shortly after Joe Biden’s inauguration).

3. Parnas’ hoped for obstruction investigation

From the start, Parnas has been alleging — credibly — that at least the timing of his arrest was an effort to protect the President and maybe even to shut him up. From early on, he used impeachment as a way to share materials obtained in discovery showing Rudy’s central role in it all. In January 2020, Parnas filed a letter he sent to Billy Barr requesting his recusal, based in part off a claim that DOJ delayed production of discovery past the time he could share it with the impeachment inquiry (in reality, the delay was partly due to the time it took to crack the password to Parnas’ phone). In December, Parnas filed a motion to dismiss his indictment, alleging selective prosecution. He focused closely on the events leading up to impeachment (and falsely suggested these events started in 2019, not 2018). Amid a list of all the times Barr corruptly intervened to protect the President, Parnas described how, just as HPSCI was asking for his testimony, he and Fruman were arrested.

Later that day, Dowd wrote to HPSCI, 6 as he had indicated he would in his e-mail: Kindly refer to my letter of October 3, 2019. This is an update. We continue to meet with Mr. Parnas and Mr. Fruman to gather the facts and documents related to the many subjects and persons detailed in your September 30 letter and to evaluate all of that information in light of the privileges we raised in our last letter. This effort will take some additional time. Accordingly, Messrs. Parnas and Fruman will not be available for depositions scheduled for October 10, 2019. The following day, October 9, 2019, Mr. Parnas met with Mr. Giuliani at the BLT Steakhouse in the Trump Hotel, Washington DC. Mr. Parnas was scheduled to travel later that evening to Frankfurt, Germany, and then on to Vienna, Austria, to meet with the former Prosecutor General of Ukraine, Victor Shokin, to prepare him for an appearance on FOX News’ Shawn Hannity Show to discuss Joe Biden. Although Mr. Giuliani, along with Victoria Toensing and Joseph DiGenova, had originally been scheduled to travel to Vienna with Parnas, Toensing and DiGenova had cancelled several days earlier, and Mr. Giuliani cancelled that day.

After finishing meeting with Mr. Giuliani, Mr. Parnas and Mr. Fruman took a car to Dulles International Airport, where they waited in the Lufthansa lounge for approximately two hours before beginning to board their flight. Unbeknownst to Messrs. Parnas and Fruman, they had been indicted in the SDNY earlier that day.

Parnas also described others involved in his illegal campaign finance activities who were not indicted, including America First Action PAC and Kevin McCarthy.

Among the things Parnas asked for was evidence that was already being collected in the second, influence-peddling investigation.

All internal documents, including memoranda, notes, e-mails, and text messages that, in any way, reference the reasons why individuals and entities including but not limited to, America First Super PAC, [redacted], Rudy Giuliani, President Donald J. Trump, Victoria Toensing, Joseph DiGenova, and John Solomon, were not arrested or charged with Mssrs. Parnas and Igor Fruman;

The government dismissed Parnas’ claim as lacking evidence but also said that some of the materials he was asking for would be covered by various privileges.

Because Parnas’s claim is meritless, the Court need not consider the contours of his discovery request (Parnas Mot. 32-33), but multiple of his requests seek materials that, if they exist, appear to be attorney work product, covered by the deliberative process privilege, and/or are outside of the scope of what would be reasonably necessary to try to advance his asserted claims rather than to gain a strategic advantage at trial.

Judge Oetken has not yet ruled on Parnas’ selective prosecution claim (or a bunch of other pre-trial motions from all defendants).

But as I noted, just the other day, Gordon Sondland provided more evidence of a corrupt cover-up pertaining to impeachment.

In his redaction fail letter, Parnas addressed very specific things he believed to exist to show a cover-up just before the influence peddling warrants got sent out, including emails he deleted.

The seized evidence will also likely contain a number and variety of communications between Giuliani and Toensing and Parnas that are directly discoverable under Fed. R. Crim. P. 16, evidence of any conversations between Giuliani, Toensing, and others, including Parnas, that may have been deleted, communications between Giuliani, Toensing and others about the defendants and how to address their prior relationships, the arrests, and the unfolding investigation, communications between Giuliani and Toensing and others with potential Government witnesses, including communications about the defendants, the offenses charged, and the witnesses’ potential disclosures and characterizations of alleged fraud-loss computations.

If Rudy and Toensing didn’t delete these materials, then they are now in US government custody. And Parnas is doing all he can to make sure the government looks at them.

RICO Comes to the January 6 Investigation — But Not the Way You Think

Longterm readers of this site know that bmaz always gets incensed when people discuss RICO, mostly because those discussions tend towards magical thinking that RICO can make complex legal questions magically result in jail time for bad guys.

That’s why I put RICO in the title.

But RICO really has come up in a January 6 case: pertaining to DOJ’s attempted seizure of the $90,000 John Sullivan made off selling his video of the insurrection. Much of that filing dismisses Sullivan’s attempt to keep the money because he needs it for living expenses. If he genuinely needed it to pay his lawyer, he might have an argument, but DOJ says he’s got other bank accounts with significant funds for that.

Here, the defendant has submitted no declaration, financial affidavit, or banking statements. He has not provided any information about his assets outside his bank account ending in 7715, the only account from which funds were seized. He has not provided information about his short- or long-term liabilities. He has not detailed his sources of income, despite being, to the government’s understanding, currently employed by his father. He has not described his ability to use other assets, liquid and non-liquid, to pay basic necessities, including the assistance of family members and friends. He has not provided information regarding what funds he has recently expended toward household expenses and what any additional funds are requested, nor detailed what the “household expenses” entail. Such specification is particularly essential where expenditures can dramatically vary, irrespective of necessity, based on a defendant’s typical lifestyle. Cf. United States v. Egan, 2010 WL 3000000, at *2 (S.D.N.Y. July 29, 2010) (“The Court does not take lightly a request to release funds allegedly stolen from former customers in order to finance luxuries” such as high-end vehicles or a multimillion-dollar home”).

A more fulsome showing is particularly warranted in light of the defendant’s Pretrial Services Report from the arresting jurisdiction, which was prepared from an interview conducted on January 15, 2021 and, according to D.C. Pretrial Services, submitted to this Court with the Rule 5 papers. That document reported significant funds in unspecified bank accounts of the defendant – funds that wholly predate, and lie entirely outside the scope of, the government’s seizure warrants. The government’s seizure warrants instead surgically targeted the defendant’s $90,875 in proceeds from sales of his video footage from the U.S. Capitol – all of which was deposited into his bank account subsequent to January 15. The Pretrial Services Report further noted multiple vehicles owned by the defendant. And it provided a specific estimate of the defendant’s monthly expenses to include rent, groceries, cell phone, auto insurance, and other incidentals – which, if extrapolated, should mean that the defendant retains substantial assets notwithstanding the government’s seizure of the $62,813.76 on April 29, 2021.

The government, moreover, is aware of at least one other bank account of the defendant with America First Credit Union in which he retained a positive balance as of March 19, 2021. Again, this account and the funds therein lie wholly outside the scope of the government’s seizure warrants.

But there’s a part of the filing that probably answers a question I asked: aside from the First Amendment concerns of seizing funds from making a video, I wondered why DOJ had invoked the obstruction charge against Sullivan to do so, rather than the civil disorder charge, as the basis for the seizure. There’s more evidence that Sullivan was trying to maximize chaos than obstruct the counting of the vote, so it seemed like civil disorder was the more appropriate felony.

It seems that invoking obstruction gave DOJ a way to seize the funds, and even then it had to go through RICO magic.

Here’s the language in question: I’ve highlighted the RICO reference in bright red letters for bmaz’s benefit.

Title 18, United States Code, Section 981(a)(1)(C) provides that “[a]ny property, real or personal, which constitutes or is derived from proceeds traceable to a violation of … any offense constituting ‘specified unlawful activity’ (as defined in section 1956(c)(7) of [Title 18 of the U.S. Code])” is “subject to forfeiture to the United States.” The provision thus subjects “proceeds” traceable to violations of specified unlawful activities (“SUAs”) to civil forfeiture. Meanwhile, criminal forfeiture is authorized when 18 U.S.C. § 981(a)(1)(C) is used in conjunction with 28 U.S.C. § 2461(c), which holds that “[i]f the defendant is convicted of the offense giving rise to the forfeiture, the court shall order the forfeiture of the property as part of the sentence in the criminal case.” In turn, 18 U.S.C. § 1956(c)(7) – which was cross-referenced in § 981(a)(1)(C) – incorporates as SUAs all predicate offenses under the Racketeer Influenced and Corrupt Organizations (“RICO”) statute – that is, “any act or activity constituting an offense listed in section 1961(1) of this title [Title 18] except an act which is indictable under subchapter II of chapter 53 of title 31.”

Finally, 18 U.S.C. § 1961(1) sets forth the RICO predicates and expressly includes, among those predicates, 18 U.S.C. § 1512. 3 Thus, “[b]y application of § 2461(c), forfeiture of property is mandated for a violation of 18 U.S.C. § 1512, since it is a racketeering activity identified in 18 U.S.C. § 1961(1), which is a specified unlawful activity under 18 U.S.C. § 1956(c)(7)(A).” United States v. Clark, 165 F. Supp. 3d 1215, 1218 (S.D. Fla. 2016) (emphasis added).

The forfeiture law, 18 USC §981, allows for forfeiture when a person profits off any of a bunch of crimes. Terrorism is in there, for example, but Sullivan is not charged with a crime of terrorism (they might get there with Sullivan if he were charged with breaking a window that surely cost more than $1,000 to fix, but they haven’t charged him for that, even though his own video suggests he did break a window and all those windows are ridiculously expensive). Instead, DOJ is using 18 USC §1956, money laundering, to get to forfeiture. Sullivan is not alleged to have laundered money. But that law includes RICO’s predicates among the unlawful activities for which one might launder money. And obstruction, 18 USC §1512, is a specific unlawful activity that may be part of RICO.

That is, they found a crime that Sullivan allegedly committed — obstruction — nested three layers deep in other statutes.

DOJ admits that obstruction hasn’t led to forfeiture all that often — but they’ve found nine cases, none in DC, where it has.

3 There is a limited number of forfeiture allegations paired with § 1512 as the SUA. Section 1512 prohibits (a) killing or assaulting someone with intent to prevent their participation in an official proceeding, (b) intimidating someone to influence their testimony in such a proceeding, (c) corrupting records or obstructing, impeding, or influencing such a proceeding, and (d) harassing or delaying someone’s participation in such a proceeding – crimes that do not often generate profits. Nonetheless, the government has identified at least nine indictments where a § 1512 count was a basis for the forfeiture allegation. See United States v. Clark, 4:13-cr-10034 (S.D. Fla.); United States v. Eury, 1:20CR38-1 (M.D.N.C.); United States v. Ford and Prinster, 3:14-cr45 (D. Or.); United States v. Shabazz, 2:14-cr-20339 (E.D. Mich.); United States v. Cochran, 4:14- cr-22-01-HLM (N.D. Ga.); United States v. Adkins and Meredith, 1:13cr17-1 (N.D. W. Va.); United States v. Faulkner, 3:09-CR-249-D (N.D. Tex.); United States v. Hollnagel, 10 CR 195 (N.D. Ill.); United States v. Bonaventura, 4:02-cr-40026 (D. Mass.). Congress likewise included some of § 1512’s surrounding obstruction-related statutes as SUAs, and forfeiture allegations have also referenced these sister statutes. E.g., United States v. Fisch, 2013 WL 5774876 (S.D. Tex. 2013) (§ 1503 as SUA); United States v. Lustyik, 2015 WL 1401674 (D. Utah 2015) (same).

Of course, those obstruction charges were probably garden variety obstruction (say, threatening trial witnesses for pay), not the already novel application of obstruction that other defendants are challenging.

bmaz may swoop in here and accuse DOJ of using RICO for magical thinking. At the very least, this all seems very precarious, as a matter of law.

I’m all in favor of preventing someone from profiting off insurrection. But this seems like a novel application of law on top of a novel application of law.

Sullivan has a hearing today before Judge Emmet Sullivan, so we may get a sense of whether the judge thinks this invocation of RICO is just magical thinking.

Vicky and Rudy: The Subjects of Delay

When I asked around last year what the net effect of Billy Barr and Jeffrey Rosen’s efforts to protect Rudy Giuliani would be, I learned that the net effect of refusing to approve searches on Rudy would only delay, but it would not change the outcome of, the investigation into the President’s lawyer.

That’s worth keeping in mind as you read SDNY’s response to Victoria Toensing and Rudy’s demand that they get to treat both the April warrants against them, as well as the 2019 warrants, like subpoenas. Effectively, SDNY seems to be saying, “let’s just get to the indictment and discovery phase, and then you can start challenging these searches.”

The filing several times speaks of charges hypothetically.

If Giuliani is charged with a crime, he will, like any other criminal defendant, be entitled to production of the search warrant affidavits in discovery, at which time he will be free to litigate any motions related to the warrants as governed by Federal Rule of Criminal Procedure 12. Conversely, if the Government’s grand jury investigation concludes without criminal charges, then the sealing calculus may be different, and Giuliani may renew his motion.

[snip]

If there is a criminal proceeding, the Government will produce the affidavits, warrants, and materials seized pursuant to those warrants, and at that time, the warrants’ legality can be litigated.

[snip]

Finally, Toensing will have both a forum and an opportunity to litigate any privilege issues if there is a criminal proceeding. As the Second Circuit has noted, in affirming the denial of a return-of-property motion, “If [the grand jury’s] inquiry results in indictment, the lawfulness of the seizure will be fully considered upon a motion to suppress, and any ruling adverse to the defendant will be reviewable upon appeal from a final judgment; if the grand jury declines to indict the movant, or adjourns without indicting it, its property will most likely be returned, and if not, it can initiate an independent proceeding for its return.” [my emphasis]

But the filing repeatedly makes clear that not just Rudy, but also Toensing (whose lawyer made much of being informed that Toensing was not a target of the investigation), are subjects of this investigation.

But the Government specifically chose not to proceed by subpoena in this case, for good reason, and there is no precedent for permitting the subjects of an investigation to override the Government’s choice in this regard.

None of the cases cited by Giuliani or Toensing supports their proposed approach. Toensing principally relies on United States v. Stewart, No. 02 Cr. 395 (JGK), 2002 WL 1300059, at *4-8 (S.D.N.Y. June 11, 2002), 4 but that case is readily distinguishable because it involved the seizure of documents from several criminal defense attorneys who were not subjects of the Government’s investigation and had many cases before the same prosecuting office

[snip]

Such concerns merely serve to highlight the many countervailing problems with Giuliani and Toensing’s proposal: under their approach, the subjects of a criminal investigation would have the authority to make unilateral determinations not only of what is privileged, but also of what is responsive to a warrant.

[snip]

Nevertheless, Giuliani argues that, quite unlike other subjects of criminal investigations, he is entitled to review the affidavits supporting the warrants, which would effectively give him the extraordinary benefit of knowing the Government’s evidence before even being charged with a crime.

[snip]

Her request is contrary to law and would effectively deprive the Government of its right to evidence in the midst of a grand jury investigation so that she, the subject of that investigation, may decide what is privileged and what is responsive in those materials.

[snip]

In other words, accepting Giuliani and Toensing’s argument about the impropriety of using a filter team to review covert search warrant returns would entitle subjects of a criminal investigation to notice of that investigation any time a warrant were executed that related to them, no matter if the investigation were otherwise covert and no matter if the approving Court had signed a non-disclosure order consistent with the law. [my emphasis]

SDNY correctly treats Rudy and Toensing’s demands to review this material before SDNY can obtain it as a delay tactic.

Giuliani and Toensing’s proposal to allow their own counsel to conduct the initial review of materials seized pursuant to lawfully executed search warrants, including making determinations of what materials are responsive to the warrants, on their own timeline is without any precedent or legal basis. The Government is aware of no precedent for such a practice, which has the effect of converting judicially authorized search warrants into subpoenas.

Indeed, their discussion of the Lynn Stewart precedent emphasizes their goal of obtaining this material expeditiously.

None of the cases cited by Giuliani or Toensing supports their proposed approach. Toensing principally relies on United States v. Stewart, No. 02 Cr. 395 (JGK), 2002 WL 1300059, at *4-8 (S.D.N.Y. June 11, 2002), 4 but that case is readily distinguishable because it involved the seizure of documents from several criminal defense attorneys who were not subjects of the Government’s investigation and had many cases before the same prosecuting office. (See infra at pp. 33-34). In any event, the Court appointed a special master in Stewart, as the Government seeks here. And the procedures adopted in Stewart illustrate why the Government’s proposed approach is preferable. In Stewart, the presiding judge initially believed that the special master’s review could be conducted expeditiously because the defendant’s counsel could quickly produce a privilege log (as Toensing seeks to do here). Id. at *8. But 15 months later, the judge lamented that the special master still had not produced a report on the seized materials. United States v. Sattar, No. 02 Cr. 395 (JGK), 2003 WL 22137012, at *22 (S.D.N.Y. Sept. 15, 2003), aff’d sub nom. United States v. Stewart, 590 F.3d 93 (2d Cir. 2009). That cumbersome process stands in stark contrast to that adopted by Judge Wood in Cohen, wherein the special master completed her review on an expedited basis in parallel to Cohen’s counsel, and set deadlines for Cohen’s counsel to object to any of her designations. (Cohen, Dkt. 39 at 1-2). In Cohen, the special master was appointed in April 2018, and her review was complete by August 2018. The Cohen search involved approximately the same number of electronic devices seized here, but also included significant quantities of hard copy documents, which are not at issue here. In sum, the Court should follow the model set forth in Cohen, which resulted in an efficient and effective privilege review. [my emphasis]

Likewise, the government also offered to pay the costs of the Special Master, so long as the Special Master follows the expeditious procedure conducted with Michael Cohen’s content.

This Court should not permit Giuliani and Toensing to stall the investigation of their conduct in this manner, particularly where the Government’s proposal will allow them to conduct the same review in parallel with a special master. The Government’s proposal to appoint a special master to review the seized materials is the only proposal that is fair to all parties, respects the unique privilege issues that the 2021 Warrants may implicate, and will ensure that Government’s investigation proceeds without undue delay.6

6 In the Cohen matter before Judge Wood, the Government and Cohen split the costs associated with the special master’s privilege review. Here, because the Government made the initial request of the Court and considers the appointment of a special master appropriate in this matter, the Government is willing to bear the costs of the review insofar as the special master follows the procedures adopted by Judge Wood in the Cohen matter, namely to review the seized materials for potential privilege in parallel with counsel for Giuliani and Toensing. To the extent the Court adopts the proposals advanced by Giuliani and Toensing, including that the special master also conduct a responsiveness review of those same materials—which the Government strongly opposes for the reasons set forth above—Giuliani and Toensing should solely bear any costs associated with a responsiveness review, any review beyond the initial privilege review, or any cost-enhancing measures traceable to Giuliani and Toensing. [my emphasis]

I’m mindful, as I review the schedule laid out above, that Cohen was charged almost immediately after the Special Master review was completed, in August 2018. In addressing the partial overlap between the 2019 searches and the April ones, the government notes that, “the Government expects that some, but not all, of the materials present on the electronic devices seized pursuant to the Warrants could be duplicative of the materials seized and reviewed pursuant to the prior warrants.”

The government already knows what they’re getting with these warrants (and if they don’t get it, they’re likely to be able to charge obstruction because it has been deleted). They’re calling for a Special Master not because it provides any more fairness than their prior filter review (indeed, they speak repeatedly of the “perception of fairness”), especially since investigators are about to obtain the materials from the 2019 search, but because it ensures they can get this material in timely fashion, especially since, as it stands now, they’re going to have to crack the passwords on seven of the devices seized from Rudy.

The remaining seven devices belonging to Giuliani and his business cannot be fully accessed without a passcode, and as such the Government has advised Giuliani’s counsel that the devices can be returned expeditiously if Giuliani were to provide the passcode; otherwise, the Government does not have a timeline for when those devices may be returned because the FBI will be attempting to access those devices without a passcode, which may take time.

Yes, Rudy and Toensing are trying to get an advance look at how bad the case against them is. But they’re also hoping to delay, possibly long enough to allow a Republican to take over again and pardon away their criminal exposure.

Which suggests that all the hypotheticals about Rudy and Toensing being able to challenge these searches if they are indicted are not all that hypothetical. SDNY is just trying to get to the place where they can indict.

image_print