Steve Bannon, U.S. President Donald Trump’s former campaign director, has been charged with money laundering conspiracy after allegedly using a nonprofit to layer more than $1 million that he and others illegally diverted from a politically charged crowdfunding campaign.
In a 24-page indictment Thursday, prosecutors in Manhattan accused Bannon, 66, Brian Kolfage, 38, Andrew Badolato, 56, and Timothy Shea, 49, of stealing from donors who gave more than $25 million to “We Build the Wall,” a purported grassroots effort to assist the federal government in building a more effective barrier along the U.S. border with Mexico.
At the onset of the campaign, which began in December 2018 and raised more than $17 million in its first week, the suspects publicly pledged to “not take a penny in salary” from donations, according to the indictment, but in reality struck a secret agreement pursuant to which Kolfage diverted $350,000, including to a personal account, and Bannon siphoned at least $650,000.
The suspects’ crowdfunding platform of choice—identified by news outlets as GoFundMe—suspended new donations to We Build the Wall within weeks of its launch amid legal questions as to whether any of the donations could be used to cover the cost of a federal project.
GoFundMe threatened to return all donations to We Build the Wall’s financial supporters unless Bannon and others could identify “a legitimate nonprofit organization into which those funds could be transferred,” federal prosecutors wrote in the indictment.
Bannon and others responded to GoFundMe’s warning by establishing We Build the Wall Inc., a 501(c)(4) nonprofit that soon afterwards opened accounts at Capital One, FirstBank in Denver and Bank First, a regional lender in Wisconsin, according to the indictment.
We Build the Wall’s conversion from a GoFundMe campaign into a formal, tax-exempt nonprofit meant that the suspects “had to effectively re-raise the approximately $20 million they had already raised from donors” by again promising to “not take a penny in salary or compensation,” prosecutors wrote.
But most donors recommitted, and by October 2019, We Build the Wall Inc. had raised a total of $25 million.
Nonprofits are often difficult to monitor for compliance purposes because they are permitted to pay a wide range of expenses to third parties, but their objectives are not always readily apparent to the financial professionals who serve them, said Annemarie McAvoy, a former federal prosecutor in New York.
“Charities are considered higher risk,” said McAvoy, now an independent consultant. “It’s hard to tell who gets the money in the end.”
The money trail
The suspects publicly pledged austerity, according to the indictment, but secretly paid Kolfage $100,000 up front and a $20,000 monthly salary by routing donations from We Build the Wall Inc.’s bank accounts to a second nonprofit that Bannon controlled—”Non-Profit 1″—then onward to PenFed credit union, where, according to the indictment, Kolfage held an account.
Kolfage’s first payment of $100,000 arrived Feb. 11, 2019.
“To conceal the payments Kolfage received from Non-Profit 1, Kolfage instructed Badolato that the payments should be made to Kolfage’s spouse, and Non-Profit 1 subsequently issued a Form 1099 falsely stating that it had paid Kolfage’s spouse for ‘media,'” prosecutors claimed in the indictment.
The indictment does not identify “Non-Profit 1” by name but separately outlines federal efforts to seize funds kept at Wells Fargo by Citizens of the American Republic, an earlier nonprofit that Bannon began promoting after exiting the Trump administration in August 2017.
An IRS database identifies Citizen of the American Republic’s location as Los Angeles and Bannon as its president, and shows that the nonprofit reported $4.4 million in revenue for 2018.
In April 2019, after having already transferred at least $40,000 from We Build The Wall Inc. through Non-Profit 1 to cover Kolfage’s secret monthly salary, the suspects sought “to further conceal payments” to him by using what the fourth suspect, Shea, described as a “veiled” entity involved in “consulting.”
Shea, according to the indictment, subsequently formed an LLC that received a $50,000 transfer from We Build the Wall Inc. on April 22, and wired $25,000 to Kolfage four days later.
The indictment’s initial description of the LLC appears to match its later description of Ranch Property Marketing & Management, which holds funds in an account at U.S. Bank that prosecutors aim to seize as part of the case.
According to a public database, Ranch Property Marketing & Management registered in Wyoming on March 26, 2019, with an address in Castle Rock, Colorado, a town of 60,000 where Shea allegedly resides. Shea’s name does not appear in the records, which instead list an employee of an online corporate formation agent, Incfile.com, as the company’s “organizer.”
Shea’s alleged shell company received another $30,000 from We Build the Wall Inc. on May 21, 2019, before wiring $20,000 to Kolfage on June 5 to cover “social media” services and keeping the $10,000 that remained.
The salary payments continued until October 2019, when the suspects “learned from a financial institution that We Build the Wall might be under federal criminal investigation.”
According to the indictment, Kolfage and Badolato reacted to the tip by using encrypted communications and publicly updating We Build the Wall’s website to show that the former would actually receive a salary.
As part of the case, prosecutors also aim to seize any funds that Bank First and Capital One hold for America First Medical LLC, a company that Kolfage registered in Wyoming in March of this year to sell medical masks in short supply during the novel coronavirus pandemic.
Bannon, who helped orchestrate Trump’s successful 2016 election campaign, faces up to 20 years in prison if convicted of money laundering conspiracy, and another 20 years if convicted of conspiring to commit wire fraud.
Contact Daniel Bethencourt at email@example.com
|Topics :||Anti-money laundering , Fraud|
|Source:||U.S.: Department of Justice , U.S.: Courts|
|Document Date:||August 20, 2020|