Broke, Busted And Disgusted: A Fuller Picture Of Manafort’s Financial Perils As He Joined Trump Camp

By December 2015, Paul Manafort had a plan.

His lucrative income from consulting in Ukraine had dried up, with the exile of his top client. His attempt to pivot by representing a new Ukrainian political party made up of the remnants of the old coalitions had failed to take off, and he was struggling even to pay his taxes.

As a Dec. 22, 2015 email to his accountant and his bookkeeper indicated, he was turning to borrowing from banks — in what special counsel Robert Mueller has alleged were ultimately fraudulent loan applications — to stay afloat. Manafort informed his outside financial help that he was taking out loans on two properties — loans that would eventually be at the heart of the special counsel’s bank fraud case against him.

A loan on his condo in SoHo would allow him to pay off loans against his credit line, including loans to fund a movie his daughter directed. A loan on a townhouse he bought in Brooklyn would let him finish construction on the property, while paying back his mortgage on his Trump Tower apartment.

Three months later, Manafort and Donald Trump would become more than just neighbors.

In March, Manafort would join the GOP candidate’s campaign, quickly rising to become its chairman, while scrambling behind the scenes to secure funds from the banks, using, according to prosecutors, a series of misrepresentations including falsified financial documents and “lies” about the use of the properties.

In his attorneys’ retelling, Manafort had delegated the details to outside professionals he employed, and the alleged falsities were merely clerical errors. If the banks had any concerns about lending to Manafort, or if his accountants questioned his tactics, they certainly didn’t say so to authorities.

“Nobody came forward to say we’re concerned about what we’re seeing here. Not until the special counsel showed up and started asking questions,” Manafort attorney Richard Westling said during last week’s closing arguments.

Regardless, what the two and half week trial has borne out is that while Manafort was leading a presidential campaign, he was also working to secure millions of dollars in desperately needed financing and to maintain the appearance that he was an extraordinarily wealthy individual.

By the summer of 2016, his two objectives — electing Trump and securing loans to ease his financial woes — had become intertwined.

The prosecutors have offered for the jury, currently deliberating, hundreds of pages of exhibits documenting not only the financial crunch Manafort was in when he took the Trump campaign job, but how he continued to leverage his proximity to Trump to woo lenders, even after his departure from the campaign. Regardless of the jury’s verdict on the bank fraud and tax fraud charges, we now have a much clearer picture of the dire straits Trump’s campaign manager found himself in before and during the campaign, and the allegedly illegal steps he took to get himself out of it.

‘How Could I Be Blindsided Like This?’

It’s not entirely clear when Manafort realized the depth of the financial hole he’d dug himself, but his money troubles had manifested by April 2015, while he was preparing his 2014 tax return.

“WTF?” Manafort wrote in an email, after learning from right-hand man Rick Gates that his tax bill would be around a half millions dollars. “How could I be blindsided like this? You told me you were on top of this. We need to discuss options. This is a disaster.”

Gates, originally a co-defendant in Mueller’s case against Manafort, flipped and testified against his old boss at the Virginia trial.

After years of allegedly hiding his income from the IRS through the use foreign accounts, according to prosecutors, Manafort took the alleged tax fraud scheme further, asking his accountants to disguise some of his income as loans so that he wouldn’t have to pay taxes on the money.

His bookkeeper, Heather Washkuhn, testified that around this time he was having trouble paying his bills, including the invoices for her services.

“I had asked multiple times for bills to be paid and there wasn’t enough funds to pay them,” she said, while questioned by prosecutors about repeated emails she sent Manafort seeking authorization for her to pay various obligations.

One such email included an April 2016 plea from the bookkeeper asking for funding to pay health insurance premiums for Manafort’s business.

In another January 2016 email, Gates asked Washkuhn to transfer $76,000 from Manafort’s line of credit to his consulting firm’s account.

“There is zero availability” on the line of credit, she replied. Other documents offered during the trial revealed the that Manafort’s firm, according to the records kept by Washkuhn, had made less than $400,000 in 2015 and had reported a net loss of more than $1 million in 2016.

That lack of income posed a problem for Manafort as he embarked on negotiations for his loans.

David Fallarino, a loan officer at Citizens Bank, informed Manafort in February that he “fail[ed] the liquidity test.” A day later, the bank’s underwriter wrote Fallarino skeptical about Manafort’s business tax returns: “The business did not have the liquidity to disperse these $’s.”

According to prosecutors, Manafort and Gates got around these impediments by backdating documents to prove that money shown as a loan on Manafort’s taxes — it was, in fact, never a loan to begin with, his accountant testified — had been forgiven and thus should be counted as income.

But that was only the start of their accounting tricks, according to the government’s case. Manafort described his SoHo condo as a residence — prosecutors put forward evidence that it was listed on AirBnB — because claiming it as a second home would allow Manafort to seek the “maximum benefit” in loan applications, he told Gates in an email.

Gates, allegedly at the instruction of Manafort, misled the bank about the existing mortgages on Manafort’s other properties. Manafort closed on a $3.4 million loan from Citizens Bank, though a second loan he pursued from the bank was denied. He also successfully sought a $1 million construction loan from the Banc of California that spring.

As part of the Citizens Bank negotiations, Gates fretted to Manafort that “we are not going to get even close to the income level of 2014,” as the bank indicated would be necessary in order to be approved for the loan. Gates admitted in testimony he had doctored the financial statement for Manafort’s businesses to show more than $6 million more in income than what the firm had received in 2015. A chain of March 16 emails released during the trial capture Gates frantically seeking a digital version of the statements created by Manafort’s accounting firm that would have allowed him to make the edits.

Manafort attorneys in the trial defended the submission of the inflated financial statements, arguing that the millions were income Manafort had earned and was expecting to receive later that year.

‘I Look To Your Cleverness’

Through this financial scramble, Manafort gave few, if any, public hints of being hard up for cash. On March 22, he renewed his business’ Yankees season tickets for a seven-year term for more than $200,000. When he was hired by then-candidate Trump a week later, Manafort declined to take a salary.

After he joined the campaign, he remained cc-ed on email conversations during which, prosecutors allege, Gates and others continued to make false representations about his financial status.

There are some vague references to the new responsibilities he had taken on by leading the Trump campaign; an April 2016 email from a Citizens Bank employee asking Gates to write a letter for Manafort’s loan application notes that Manafort’s hands are “full.”

Manafort’s attorneys have argued that by depending on Gates to handle his financial affairs, he trusted the wrong person. Gates has admitted to embezzling from Manafort’s business.

Regardless, by July, Manafort had taken matters into his own hands while applying for loans from Federal Savings Bank. Its CEO, Steve Calk, learned that the Trump campaign chairman was seeking to borrow from his bank from one of his employees, who testified that he told Calk about the Manafort referral because he knew Manafort was “involved in politics” and “Steve was interested in politics.”

Calk and Manafort had a series of meetings, many without any other bank employees present; Calk personally approved the terms of loans Manafort proposed.

“He was directly involved,” the employee, Dennis Raico, testified, while claiming he had never seen Calk get involved in the details of any other loans he’d worked on for the bank.

Calk approved a loan application the day after a July 27 meeting with Manafort where he told Manafort he was interested in helping Trump, according to Raico’s testimony.

A week later, Manafort reached out to Calk, “[p]er our conversation,” about serving on Trump’s campaign as an economic advisor, a position Calk accepted enthusiastically.

On Aug. 19, Manafort was ousted from the Trump campaign as his political work in Ukraine and the money he had earned fell increasingly under scrutiny. But Manafort and Calk stayed in contact. At lunch with Calk, according to an Oct. 7 email presented at trial, Manafort apparently misstated the details of one of his existing mortgages by $1 million. He emailed Calk to tell him he would not be able to come up with the cash to cover the $1 million difference, as another bank employee indicated he would need to do.

“I look to your cleverness on how to manage the underwriting,” Manafort said.

The negotiations over that particular loan would fall through, but Calk would push for a revised $9.5 million proposal for Manafort that would close in mid-November.

As part of those negotiations, Manafort would continue to misrepresent his company’s earnings, according to prosecutors. A set of emails from Oct. 21 introduced at trial show Manafort seeking Gates’ help in converting a financial document for his companies’ year-to-date earnings that year into a word file, allegedly to edit it. That “REVISED” financial statement, as one of Manafort’s emails to Gates called it, showed his firm earning more than $3 million in income through Sept. 30, 2016. The financial statement also misspelled the words “September” and “review.”

On Nov. 15, the day before the loan closed and less than a week after the election, Calk sent Manafort a memo pitching himself for a position in Trump’s cabinet, and included a ranking of jobs he would prefer. Army Secretary topped the list. Two weeks later, Manafort emailed Trump son-in-law and top advisor Jared Kushner recommending Calk for Army Secretary.

Calk would never get a job in the Trump administration; it does appear, according to one email shown at trial, that he at least scored tickets to the inauguration. Scrutiny of Manafort and his Ukraine work continued, meanwhile, as questions about the campaign’s Russia ties moved front-and-center in the press.

But Manafort would get one more loan, this one for $6.5 million, approved by Federal Savings Bank in January 2017. Part of the loan was a construction loan on the Brooklyn townhouse that Manafort told his accountants he was seeking more than a year earlier.