Apology: Judge T.S. Ellis III told the jury: ‘Put aside these criticisms. I was probably wrong,’ after prosecutors complained an outburst on Wednesday could have prejudiced the case
Paul Manafort told his son-in-law to lie about living in a plush Manhattan loft he was renting out on Airbnb so he could con a bank into giving him a $3.4million loan, prosecutors revealed Thursday.
The development came as the prosecution scored a rare victory over Judge T.S. Ellis III, who admitted he was wrong to reprimand them on Wednesday in one of the brow-beatings which have become a hallmark of the trial.
He told the jury ‘put aside these criticisms. I was probably wrong’ after Robert Mueller’s prosecutors filed a formal complaint about the intervention.
The prosecutors at the former Trump campaign chairman’s fraud trial disclosed an email on Thursday which he sent his then-son-in-law Jeff Yohai warning him that an independent appraiser wanted confirmation the condo at 29 Howard St was a residence.
‘Remember, he believes that you and Jessica are living there. Let me know when you have arranged it,’ Manafort wrote in January 2016, referring to his daughter Jessica who was married to Yohai at the time.
The alleged deception meant Manafort, 69, was able to secure a mortgage refinancing loan from Citizens Bank that was more than three times the maximum $1million offered on rental properties.
Peggy Miceli, vice president underwriting manager at Citizens Bank, told the federal court jury in Alexandria, Virginia, that the bank’s rules are far stricter when people try to get refinancing loans on investment properties.
The maximum loan on rentals is capped at $1million, less than a third of the $3.4 Manafort was able to secure by allegedly claiming the Howard St pad was a second home for him and his wife.
‘It’s a higher risk loan because you are not living there,’ she said. ‘The bank’s policy is they limit the loan amount. They limit it to $1million.’
In another email to a colleague disclosed in today’s proceedings, Miceli had revealed doubts about Manafort’s funds, writing, ‘the business did not have the liquidity to dispense these’, before signing off with a sad face emoji.
However she told the court she eventually signed off on the application after receiving a document from the veteran lobbyist’s accountant stating that a $1.5million loan from Peranova Holdings Ltd. had been forgiven.
Miceli said she would have asked for more evidence, however, if she knew that the entity known as Peranova was actually controlled by Manafort himself.
Also giving evidence Thursday was Darin Evenson, head of customer experience at Airbnb, who said the Howard St condo was listed as available for rent on the site from January 2015 through April 2016.
Family affair: Paul Manafort sent an email to his then son-in-law Jeff Yahai telling him he needed to lie to loan appraisers that Manafort’s SoHo apartment was being used as a residence when it was actually on Airbnb
Property: Paul Manafort applied for a loan on the SoHo, New York, apartment in this building he owned, but prosecutors say he fraudulently said the apartment was for his use – then put in on AirBnB
On trial: Paul Manafort denies bank and tax fraud charges. His trial was dominated by three days of evidence from his former deputy, Rick Gates, who flipped and became a cooperating witness with the Robert Mueller probe
The property was advertised as ‘Amazing full floor loft in SoHo’ with ‘radiant heated floors’, boasting of its upscale location with ‘luxury shopping on your doorstep.’
Five guests paid as much as $16,325 to stay there for 21 nights in June 2015. In cross examination, defense attorney Jay Nanavati suggested that the luxurious pad could still be a primary or second residence regardless of whether it was listed on Airbnb.
Evenson agreed that 73 percent of the properties listed for rent on the site are the hosts’ main homes. Nanavati also asked if the swank property was rented for just five days in 2016 and 77 days in 2015 but Evenson said he didn’t have the figures available.
Jurors heard Manafort applied for a second loan with Citizens Bank about a month after securing his $3.4million refinancing deal – but the new application was turned down.
Loan officer assistant Taryn Rodriguez said he asked for a $5.5million construction loan on the Union St property in Brooklyn.
The paperwork from the previous application listed it as mortgage free but when Rodriguez searched New York’s ACRIS public property records database she noticed there was a mortgage on the home.
‘I don’t remember the exact amount but it was in the millions’, she told the court, revealing that the new loan application was subsequently rejected.
The court heard however that Manafort was able to secure a second $1million loan In May 2016 from the Banc of California.
Vice President Gary Seferian said Manafort initially asked for a $5 million but they offered him a fifth of that when they discovered that a $25 million property in Bridgehampton, New York that he initially claimed was his, in fact belonged to his wife Kathleen.
Seferian told the court that Manafort also failed to disclose the $3.4million loan he had just secured from Citizens Bank.
Prosecuting attorney Uzo Asonye revealed two financial documents to the court side by side, one showing Manafort’s DMP International business with a net income of $4.4 million and another with a net income of just $400,000.
The court had already heard in the previous testimony of Rick Gates that Manafort allegedly ordered him to falsify these profit-and-loss accounts so the veteran lobbyist could claim enough income to secure the loan.
Asked if Manafort would have qualified for the loan had he known the true figures, Seferian said: ‘I don’t think so.’
Pressed by prosecutors on what he would have done had he suspected fraud, the banking executive added: ‘I would have stopped the application and spoken to my legal department.’
Melinda James, a mortgage loan assistant at Citizens bank, told how Manafort misled her colleagues into agreeing a $3.4 million mortgage refinancing loan on a New York condo.
James said that Manafort and his former assistant-turned prosecution witness Rick Gates stated in emails and supplied documents stating it was a second home rather than an investment property.
But when she looked up 29 Howard St, Manhattan on New York real estate website StreetEasy she saw that ‘it was listed for rent,’ she told the court.
Prosecutor Uzo Asonye said that a previous 2015 tax return confirmed Manafort had earned around $100,000 in rental income on the property in the trendy SoHo neighborhood.
However Manafort told Citizens Bank he and his wife Kathleen lived there as ‘secondary residents’ alongside his daughter Jessica and now former son-in-law Yohai.
James also testified that Manafort told her that another townhouse, 377 Union Street in Brooklyn’s upscale Carroll Gardens, was mortgage ‘free and clear’ and yet when she looked up insurance documents she found it was subject to a $5.3 million loan.
The court heard that when she raised her concerns to her boss, Gates emailed her, copying in Manafort, insisting there was no mortgage, merely offers they hadn’t taken up, and attached insurance documents ‘reflecting the correct information.’
One March 4, 2016 Manafort attended the loan’s closing in person, as the law requires, again affirming the false information despite wording on the contract warning it was a criminal offence to lie. Asked why the allegedly misleading was significant, James told the court it could have altered their decision to lend him money.
‘The underwriter needs a clear picture of all the borrower’s monthly debts to make a decision,’ she said.
As the defense prepared to cross examine, there was yet another tetchy exchange between Judge Ellis and Asonye as he stood up to object to a defense motion introducing one of his own exhibits against him.
Arrival: Paul Manafort’s wife Kathleen (center) has been present in court throughout his trial
‘Sit down Mr Asonye. I’ll get to you I promise,’ barked the Princeton, Harvard and Oxford-educated judge. ‘It interrupts the speaker and it interrupts me.’
He softened his tone somewhat however and drew laughs from the public gallery when he added: ‘You need to be patient – so do I.’
Manafort is accused of failing to pay tax on $16.4 million he made working for a pro-Kremlin political party in Ukraine between 2006 and 2015. Prosecutors say he hid his massive earnings by having the money wired to foreign shell corporations and then sent to him as loans.
They allege that Manafort funneled $30 million through a complex network of offshore bank accounts while splashing the undeclared cash on properties and luxury items – including a $21,000 watch and a ‘custom $15,000 jacket made from an ostrich.’
The 69-year-old defendant is further accused of lying to banks about his income and debts to fraudulently secure $26 million worth of loans.
Manafort was Trump’s campaign chairman from March to August 2016 and was present at the now-notorious Trump Tower meeting where Donald Trump Jr. and Jared Kushner met a Russian attorney who claimed to have incriminating information about Hillary Clinton.
But while this is the first trial to emerge from Mueller’s probe of Kremlin interference in the 2016 US election, prosecutors haven’t mentioned Russian meddling at all.
Their case only briefly touched upon Manafort’s Trump campaign ties when it was alleged that he recommended his banker, Steve Calk, for a top Pentagon job after securing a $16million loan from him.
Not in the clear: Paul Manafort’s property in Brooklyn’s upscale Carroll Gardens was also involved in his fraud, the court heard. He falsely said it was mortgage-free when it was not
The court heard that Manafort also tried to get tickets to Calk, founder and CEO of The Federal Savings Bank of Chicago, and his son tickets to Trump’s inauguration.
The prosecution’s case will largely hinge on the credibility of his former business partner Gates, now the star witness for the prosecution who concluded his evidence Wednesday.
Gates, 46, struck a plea deal in February, admitting two charges of conspiracy and lying to the FBI in return for telling prosecutors how the pair concealed the vast fortunes they made lobbying in Ukraine.
In ten hours of testimony earlier this week, Gates told the jury of six women and six men in forensic detail how the pair hid their income in foreign bank accounts to evade federal taxes.
He also described how Manafort doctored a 2016 profit-and-loss statement to change a $638,000 loss to a multimillion-dollar profit which Gates then used to a bank to secure a loan.
Manafort’s attorneys responded by attacking married Gates as a thief and serial adulterer who embezzled money from Manafort’s overseas accounts to lead a ‘secret life’.
They told the court he stole millions over the years to fund his own lavish jet-setting lifestyle and secret mistresses, then committed tax and bank fraud under Manafort’s name in order to cover up his own crimes.
Under cross examination, Gates admitted stealing ‘several hundred thousand’ dollars from Manafort by submitting false expense reports and confessed to having an extramarital relationship.
But he told the jury: ‘I regret it clearly and I’m taking responsibility for it.’
Gates was originally charged as a co-conspirator before agreeing to give testimony against his former friend in the hope of leniency.
Under the terms of his deal – which can still be revoked if it’s established he’s lied on oath – Gates faces up to six years in prison after pleading guilty to two charges of conspiracy and lying to the FBI.
Manafort however has been warned by Judge Ellis he faces the possibility of spending ‘the rest of his life in prison’ if found guilty.
He denies five counts of filing false income tax returns, four counts of failing to report foreign bank accounts, four counts of bank fraud and five counts of bank fraud conspiracy.
The bank fraud charges carry a maximum sentence of 270 years, failing to report foreign bank accounts a possible 20 and filing false tax returns a further 15.
The trial continues.