Paul Manafort, who served as President Donald Trump’s campaign manager for five months in 2016, was accused Monday of laundering millions of dollars in foreign money through U.S. real estate as part of a sweeping indictment dealing with Manafort’s work for foreign governments.
The indictment, which was unsealed Monday, comes from the special investigation led by special counsel Robert Mueller into Russia’s alleged interference in the 2016 presidential election.
According to the indictment, Manafort and an aide, Richard Gates, are charged with conspiracy against the United States, money laundering, failure to file reports of foreign bank and financial accounts, working as an unregistered agent of a foreign principal, making false statements to the Department of Justice, and other charges covering a period of approximately 2006 through at least 2016.
The indictment states that Manafort and Gates generated “tens of millions” of dollars in income as a result of their Ukraine work, but they allegedly took many steps to hide that money from U.S. authorities.
Specifically, the indictment states that Manafort and Gates “laundered the money through scores of United States and foreign corporations, partnerships, and bank accounts.”
They allegedly did this by hiding the money in foreign shell companies and then using the money to support Manfort’s “lavish lifestyle” in the U.S.
“In furtherance of the scheme, Manafort used his hidden overseas wealth to enjoy a lavish lifestyle in the United States, without paying taxes on that income,” the indictment states. “Manafort, without reporting the income to his tax preparer or the United States, spent millions of dollars on luxury goods and services for himself and his extended family through payments wired from offshore nominee accounts to United States vendors.”
Beyond that, Manafort allegedly used those shell companies to buy luxury real estate in the U.S., before borrowing millions of dollars using the those same properties as collateral, thereby obtaining cash without reporting and paying taxes on the income.
According to the indictment, Gates was “instrumental” in opening the shell company accounts, and used the money in question to “pay for his personal expenses, including his mortgage, children’s tuition, and interior decorating of his Virginia residence.”
But that was nothing compared to what Manafort allegedly did.
In total, more than $75 million passed through the offshore accounts, the indictment states. Of that, Manafort allegedly laundered more than $18 million, which he used to buy property, goods, and services in the United States, as part of income that he concealed from the Department of the Treasury, the Department of Justice, and others.
According to the indictment, Manafort used the foreign shell companies to buy luxury real estate in the New York City area.
In one case, Manafort allegedly used a corporate vehicle called “MC Soho Holdings, LLC,” which was owned by Manafort and his family, to buy a condominium on Howard Street in the Soho neighborhood in Manhattan, New York for approximately $2.85 million.
According the indictment, all the money used to purchase the condominium came from shell companies opened by Manafort in Cyprus.
But Manafort didn’t live in the Soho condo. Instead, he rented it out on Airbnb.
“Manafort used the property from at least January 2015 through 2016 as an income-generating rental property, charging thousands of dollars a week on Airbnb, among other places,” the indictment states. “In his tax returns, Manafort took advantage of the beneficial tax consequences of owning this rental property.”
While the condo was being rented out on Airbnb and “other places,” Manafort allegedly applied for a mortgage on the property. And, because the bank in question would provided a larger loan if the property were owner-occupied rather than rented, Manafort “falsely represented to the bank and its agents that it was a secondary home used as such by his daughter and son-in-law and was not a property held as a rental property.”
Included in that deception was a January 2016 communication between Manafort and his son-in-law, where he told his son-in-law that his son-in-law should “[r]emember, he believes that you and [Manafort’s daughter] are living there” when the bank appraiser comes to assess the condo.
Then, at Manafort’s request, Gates allegedly caused a document to be created that listed the Howard Street property as the second home of Manafort’s daughter and son-in-law, even though Gates knew this wasn’t true.
According to the indictment, as a result of these false representations, the bank provided Manafort a loan for approximately $3.19 million for the condo.
Additionally, in 2012, Manafort allegedly used a corporate vehicle called “MC Brooklyn Holdings, LLC” to buy a brownstone on Union Street in the Carroll Gardens section of Brooklyn, New York for approximately $3 million.
The indictment claims that all of that money came from a foreign shell company in Cyprus.
According to the indictment, after buying the property in question, Manafort began renovations to turn the multi-family dwelling into a single-family home.
Then, from late 2015 through early 2016, Manafort tried to borrow cash against the property.
Manafort allegedly went to a company that provided “construction loans,” which are loans that require the loan amounts to be used to pay solely for construction of the property and thereby increase the value of the property serving as the loan’s collateral.
Under those pretenses, the institution would loan money against the expected completed value of the property, which in the case of the Union Street property was estimated to be $8 million.
Then, in early 2016, Manafort allegedly obtained a loan of approximately $5 million on the property, after promising the bank that approximately $1.4 million of the loan amount would be used solely for construction of the property.
But Manafort didn’t use the money in question for its designated purpose.
From the indictment:
However, Manafort never intended to limit use of the proceeds to construction as required by the loan contracts. In December 2015, before the loan was made, Manafort wrote his tax preparer, among others, that the construction loan "will allow me to pay back the [another Manafort apartment] mortgage in full. …" Further, when the construction loan closed, Manafort used hundreds of thousands of dollars from the construction loan to make a down payment on another property in California.
Manafort and Gates both pleaded not guilty to the raft of charges, with a judge setting bail at $10 million for Manafort and $5 million for Gates.
On Monday, White House Press Secretary Sarah Huckabee Sanders said the charges unsealed Monday “have nothing to do with the president’s campaign or campaign activity.”
To read the Manafort and Gates indictment in full, click here.