A grand jury in the Eastern District of Virginia returned a superseding indictment Thursday against Paul Manafort and Rick Gates, whom Special Counsel Robert Mueller had previously charged with money laundering, failure to register as a foreign agent and other crimes. The new indictment adds charges of tax fraud and bank fraud, and it expands significantly on the allegations of Manafort and Gates’s money laundering.
While the October indictment was filed in the U.S. District Court for the District of Columbia, the superseding indictment was filed in the U.S. District Court for the Eastern District of Virginia. A status report filed alongside the superseding indictment by the special counsel’s office explains that “based on our current evidence, venue for these charges does not exist in the District of Columbia.” The report explains:
Prior to instituting this criminal action, the Special Counsel’s Office met with defense counsel to go over the proof underlying the bank fraud charges (the tax charges were already the subject of charges before this Court) and to provide counsel an opportunity to present any arguments as to why these charges should not be brought. The Special Counsel's Office also alerted defense counsel for each defendant that the government was prepared to bring all of the charges before a Grand Jury in the District of Columbia, if the defendants were willing to waive venue (since otherwise we could not do so legally). If venue had been waived, the defendants would have faced a single indictment in one district, and not two indictments in adjacent districts. One defendant elected, as is his right, not to waive venue. The Special Counsel's Office accordingly has proceeded in the Eastern District of Virginia.
While a public document in D.C., the case is still under seal in the Eastern District of Virginia. The superseding indictment is public because Mueller’s office filed it as an exhibit attached to the status report in Washington.
So what are the big takeaways from the new indictment? Below is a quick overview of the new information.
Between the original and the superseding indictment, here's how the charges stack up:
- The indictments overlap in charging Manafort with four counts and Gates with three counts of “Failure To File Reports Of Foreign Bank And Financial Accounts” (31 U.S.C. §§ 5314 and 5322(a); 18 U.S.C. § 2).
- The original indictment charges both Manafort and Gates with one count each of “Conspiracy Against the United States” (18 USC § 371); “Conspiracy to Launder Money” (18 USC § 1956(h)); “Unregistered Agent of a Foreign Principal” (22 USC §§ 612 and 618(a); 18 USC § 2); “False and Misleading FARA Statements” (22 USC §§ 612 and 618(a)); and “False Statements” (18 USC §§ 2, 1001(a)).
- The superseding indictment builds on the original indictment in charging Manafort with five counts of “Subscribing to False United States Individual Income Tax Returns” (26 USC §§ 7206(1), 18 USC 2). Gates is charged with five counts of “Assisting in the Preparation of False United States Individual Income” (26 USC §§ 7206(2)) and six counts of “Subscribing to False United States Individual Income Tax Returns” (26 U.S.C. § 7206(1); 18 U.S.C. § 2). Both Manafort and Gates are charged with five counts of “Bank Fraud Conspiracy” (18 USC § 1349) and four counts of “Bank fraud” (18 USC §§1344, 2).
Simply put, the superseding indictment substantially increases the amount of financial crimes with which Gates and Manafort have been charged.
Once again, the indictment contains no allegations about the Trump presidential campaign or any work by Manafort or Gates relating to Donald Trump. And there are no allegations of wrongdoing by the Trump campaign or anything having to do directly with Russian election interference. But the indictment alleges bank fraud between 2015 and 2017—a time frame that indicates Manafort and Gates’s activities would have continued through both their time on the campaign and Gates's time on the presidential transition team.
There's a good deal of new information here as to just how the government believes Manafort and Gates to have gone about their money-laundering scheme. According to the special prosecutor, during the period in which Manafort and Gates allegedly received large amounts of money from their work in Ukraine, they laundered money by bringing it into the United States disguised as corporate loans. In fact, these “loans” came from offshore corporations that they themselves controlled, the indictment alleges. This allowed them to move money into the United States without reporting it as income. Manafort allegedly used his offshore banking accounts to purchase and improve real estate in the United States; Gates used the accounts to pay for his mortgage and interior decoration, as well as his children’s tuition. Through this system, Manafort allegedly laundered more than $30 million with Gates’s assistance. Gates allegedly laundered more than $3 million.
Gates and Manafort, the indictment states, failed to report their foreign accounts to the Treasury Department (Manafort for each year between 2008 and 2014; Gates for each year between 2010 and 2013). Between 2008 and 2014, Manafort (with Gates’s help) allegedly lied on his tax filings by declaring that he had no foreign bank accounts. Gates did the same between 2010 and 2013.
When the money from Ukraine dried up, Manafort and Gates used the real estate Manafort had purchased previously to obtain mortgages, which provided them with a source of income without having to pay taxes, the indictment charges. In order to receive the loans, the two lied about Manafort’s income, debt and use of the property. The indictment lists five examples:
- In 2012, Manafort allegedly purchased a Brooklyn brownstone with $3 million in cash from an offshore entity in Cyprus. He lied on the application for a loan he later used to renovate the house, telling the lender that he did not receive more than half of his income from outside the U.S. From 2015 through 2016 (when Gates and Manafort fell on hard times), Manafort borrowed money against the brownstone by falsely telling the lender that he would use a set amount of the loan to improve the brownstone. In fact, he used at least some of that money to pay back a mortgage on another apartment, among other purposes unrelated to construction.
- In 2012, Manafort purchased an apartment in Manhattan for $2.85 million, which he withdrew from his offshore entities in Cyprus, the indictment says. He then gained extra income by renting out the apartment. From 2015 to 2016, Manafort applied for a mortgage on the apartment but told the bank that the property was a secondary home, instead of a rental property, in order to receive a larger loan. Gates also allegedly helped Manafort falsify information in his mortgage application, providing outdated documents in order to hide Manafort’s mortgage on the brownstone and pretend that a separate outstanding loan of Manafort’s had been forgiven. (In fact, the “loan” in question was money funneled into the United States from an offshore entity controlled by Manafort, which he had used to buy the apartment in the first place, the prosecutors contend.)
- In 2016, Manafort allegedly applied for a business loan. He did not report his mortgage on the brownstone and misrepresented the size of the loan on the apartment. He also submitted financial records for his consulting company (DMP International, or DMI) that vastly inflated its 2015 income, from less than $400,000 to more than $4 million, the indictment states. After Gates and Manafort failed to persuade their bookkeeper to overstate the income, Gates changed the numbers himself.
- In 2016, Manafort allegedly applied for a new loan on the brownstone from a different lender, hiding his previous loan and submitting financial records that showed his company’s 2016 income to be $2 million more than the actual amount.
- In 2016, Manafort allegedly applied for a mortgage on real estate in Bridgehampton, N.Y. To help the application, Gates forged an invoice for $2.4 million to be paid to DMI later that year. The bank ultimately denied the loan application, but Manafort and Gates were able to obtain a mortgage from another bank by submitting doctored financial records inflating DMI’s income for 2015 and 2016. Gates also wrote a letter to the bank falsely claiming that he was responsible for a $300,000 debt on Manafort’s credit card and would pay Manafort back, the prosecutors contend.
The indictment appears to reference two additional conspirators. In two instances, Manafort and Gates coordinated with an individual or individuals listed only as “another conspirator” to misrepresent DMI’s income. (It is not clear whether these references are to two separate people or whether one person helped in both cases.) Additionally, the indictment references a conspirator working at one of the lenders, who helped Manafort and Gates falsify the income records in 2016. None of these individuals is named.
Notably, NBC recently reported that the special counsel’s office is investigating the possibility of a “quid pro quo agreement” between Manafort and Federal Savings Bank President Stephen Calk. Reportedly, Mueller is examining whether Calk gave Manafort $16 million worth of loans in exchange for a promised White House post. Manafort received the loans from December 2016 to January 2017.