Paul Manafort exits the District Courthouse in Alexandria, Virginia, U.S. (Photographer: Zach Gibson/Bloomberg)

Manafort Must Decide on Defense as Mueller Wraps Up Case

(Bloomberg) -- Prosecutors for Special Counsel Robert Mueller concluded their case Monday as the bank- and tax-fraud trial of Paul Manafort entered its third week. Manafort’s lawyers now have a choice -- should they put on a defense to persuade jurors he’s not guilty or rest, satisfied that prosecutors failed to prove their case beyond a reasonable doubt?

Mueller Calls Last Witness, Manafort Seeks Dismissal (6:09 p.m.)

Mueller’s prosecutors called their final witness Monday and U.S. District Judge T.S. Ellis III is now considering a request from Manafort’s lawyers to dismiss the case before it goes to the jury. Ellis ended the day by closing the courtroom to the public to hear arguments on a sealed motion by Manafort.

Manafort, 69, must decide whether to present any defense witnesses or take the witness stand himself. If Manafort offers no witnesses, closing arguments could begin as early as Tuesday.

As the final witness, prosecutors recalled Paula Liss, a senior special agent at the Financial Crimes Enforcement Network, to testify about the failure of Manafort’s companies to file reports of foreign bank accounts, or FBARs, each year from 2011 to 2014. Liss said she searched FinCEN’s database, and Manafort’s companies didn’t file the reports.

Ellis told jurors to consider the testimony only to help determine whether Manafort willfully failed to file individual FBARs, as charged in the indictment. He stressed that the companies weren’t charged, and Manafort can’t be convicted because the firms failed to file FBARs.

Liss followed spirited questioning of James Brennan, a vice president at Chicago-based Federal Savings Bank tasked with reviewing $16 million in loans that the lender extended to Manafort. Brennan told jurors about the reservations of bank officials over Manafort’s ability to repay the loans, but Chief Executive Officer Stephen Calk insisted they go through. Another banker testified last week that Calk pushed for the loan approvals even as he sought Manafort’s help in getting a job in the Trump administration.

“It closed because Mr. Calk wanted it to close,” said Brennan, who testified with a grant of immunity because he feared prosecution. He was first approached by the FBI in front of his house in June 2017.

He gave the loan application a passing grade although he didn’t believe it deserved one, Brennan said. “Mr. Calk insisted the loan was going through.” A three-member credit committee, which included Calk, agreed to lend money to Manafort, he said.

Brennan was not the only one to raise questions. Brennan said the bank’s primary regulator, the Office of the Comptroller of the Currency, asked him pointed questions about whether the bank overvalued Manafort’s property and income.

Prosecutor Greg Andres closed with a flourish when he asked about the status of Manafort’s loans. Brennan said the bank wrote off the entire value of the loans outstanding at the end of 2017 and “took a hit to our loan-loss reserve.” The bank, he said, was out $11.8 million.

Defense Lawyer Seeks to Blunt Banker Testimony (3:19 p.m.)

Under questioning by defense lawyer Richard Westling, banker James Brennan seemed to concede that Chicago-based Federal Savings Bank knew about some of Manafort’s real estate debts, undercutting prosecutors’ claims that Manafort had hidden them from the lender as he sought seeking $16 million in loans.

A November 2016 email from Brennan, a senior vice president in the bank’s Maryland office, included a list of three Manafort-associated properties with liens against them, including his estate in Bridgehampton, New York, a home in Alexandria, Virginia, and an apartment in Trump Tower in New York.

But Brennan resisted the lawyer’s suggestion that the bank’s exposure was limited by the more than $15 million in collateral -- including the Bridgehampton and Alexandria properties plus cash -- against which Manafort had borrowed $9.5 million.

“If the bank had to foreclose on it, it is always a question as to whether we’ll get our money back,” Brennan said.

Manafort’s Lies Went to Character, Banker Testifies (2:45 p.m.)

Before Manafort borrowed $16 million from Federal Savings Bank of Chicago, he lied on applications about his income, the reason he had run up American Express debt and the loans he had outstanding, a banker testified on Monday.

Brennan, the Federal Savings Bank senior vice president, said Manafort gave the bank a phony statement showing his political consulting business made $4 million more than it had actually earned. He said Manafort told the bank that he had lent his American Express card to an associate, Rick Gates, who sent a letter saying he spent more than $200,000 on New York Yankees tickets. Manafort failed to disclose mortgages he had on properties, and two were in foreclosure, Brennan testified on the trial’s 10th day.

Prosecutor Greg Andres asked if it would matter to the bank if Manafort failed to identify the debts he owed on his properties.

“It would be a definite red flag which goes to the heart of the matter,” Brennan said.

Brennan said he came to learn that an income statement that Manafort submitted falsified business income for 2015. Andres asked why that might be significant.

“It would go to the character of the borrower and raise a red flag,” Brennan said. “We would turn down the loan. As a lender, you want to know who you’re lending to.”

Brennan testified with an immunity grant because he feared prosecution. He amplified testimony that jurors heard on Aug. 10 from another Federal Savings Bank witness, Dennis Raico, who also had an immunity grant. Raico said the bank’s chief executive officer, Stephen Calk, expedited the two loans that Manafort received because Calk wanted his help in getting a job in the Trump administration.

Asked by Andres if he knew why the loans were approved, Brennan said: “There was an email from Mr. Calk that he wanted the loans to close.”

Mueller Says Manafort’s Lies to Bank Were Fraud (12:10 p.m.)

Mueller’s prosecutors filed a motion Monday asserting that Manafort fraudulently borrowed $16 million from Federal Savings Bank of Chicago when he submitted phony financial documents. Jurors heard on Aug. 10 that Manafort got two loans from the bank after Calk, the chief executive officer who was seeking a Trump administration job, overrode objections from his subordinates.

False documents Manafort submitted about his income and credit-card debt mattered -- or were material, in legal parlance -- “because they were capable of influencing” the bank’s analysis of the loans, prosecutors wrote. They argued that even if Calk intended to approve the loans “for reasons relating to his personal interests, that would have no bearing on the materiality of Manafort’s false and fraudulent representations to the bank.”

They said materiality doesn’t depend on whether the bank was actually influenced by Manafort’s false statements. Even if Calk knew of Manafort’s falsehoods, that wouldn’t be relevant because Calk and the bank are separate entities, prosecutors said. They conceded, though, that he owns 67 percent of its holding company, National Bancorp Holdings Inc.

Manafort, 69, is charged with bank fraud and a conspiracy to commit that crime. Under the law, prosecutors argued, it doesn’t even matter whether he succeeded in conspiring with Gates, his former right-hand man who pleaded guilty and is cooperating with Mueller.

At a sidebar conference on Aug. 10, Andres, the prosecutor, said that Calk was considered a conspirator in the fraud, and “he participated in the conspiracy to defraud the bank.” He also added without elaborating: “Mr. Calk has other criminal liability aside from this bank fraud.”

Mueller Wants Another Crack at Unreported Accounts (10:55 a.m.)

The prosecution case against Manafort has three legs: that he failed to disclose foreign accounts and underreported $16 million in income on his tax returns; that he defrauded three banks in borrowing $20 million; and that he failed to file foreign bank account reports, or FBARs. Among them, the FBAR leg may be the most wobbly.

For one thing, the FBAR filing rules are complex. A U.S. taxpayer must file an FBAR if he has a financial interest in or signature authority over one or more accounts with a combined value of $10,000. Jurors have seen evidence that Manafort was the authorized signer on four of 31 foreign bank accounts discussed at trial and the beneficial owner of six accounts. Manafort’s lawyers also suggested he didn’t file because he was confused or because of an oversight, not because of a willful intent to deceive.

Prosecutors sought to strengthen their case against Manafort by asking FinCEN’s Liss whether he would have to file FBARs for his political consulting companies, Davis Manafort Partners and DMP International, if they had more than $10,000 in a foreign bank account in 2010 and 2011. Liss answered yes. U.S. District Judge T.S. Ellis III softened the impact of that disclosure by ruling in a sidebar conference that only Manafort, and not his companies, are on trial.

Now, prosecutors want Ellis to allow them to argue to jurors that Manafort’s failure to file FBARs for his consulting companies is admissible under an evidentiary rule allowing prior bad acts. “The government is entitled to present evidence tending to make it more probable that Manafort acted willfully rather than as a result of confusion or oversight,” prosecutors argued in court papers.

Manafort’s lawyers argued that such evidence is unfairly prejudicial and may lead jurors to conclude that because he didn’t file for those companies, he “must be guilty of willfully failing to file his individual FBARs for those same years.” Ellis is expected to rule Monday on Mueller’s request and decide whether Liss can return to the witness stand.

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