Manafort prosecutors ask whether 'opaque' firm's loan is 'sham'
Prosecutors working for Special Counsel Robert Mueller raised the prospect that a $1 million loan to Paul Manafort in 2017 from an "opaque" Nevada company might have been a "sham transaction" in which no repayment was ever expected.
The company, Woodlawn LLC, could be an "alter ego" for Manafort himself, prosecutors wrote in court papers filed late Friday in Washington. Because the company's ultimate funding source remains unclear, they wrote, they are seeking information that would rule out that Manafort himself could be behind the bid to secretly recoup money he agreed to turn over to the government.
Manafort agreed to forfeit properties as part of a guilty plea to conspiracy. The loan tied to one of those properties has been a curious sideshow in Manafort's long-running legal travails since a fringe player in Hollywood was briefly installed as the mysterious company's public face. The latest filing came just hours after Mueller submitted his report on Russian interference in the 2016 presidential election to Attorney General William Barr.
Barr wrote Sunday that Mueller didn't find evidence that Donald Trump's presidential campaign conspired with Russians who tried to bolster his candidacy. But as the loan filing indicates, the Justice Department continues to pursue matters the special counsel's office opened as it pressed ahead to answer the collusion question.
A lawyer for Woodlawn rejected the government's claims.
"Those allegations are paranoid nonsense," attorney David Smith said in an email Sunday. He said that Woodlawn would respond to the Justice Department by providing "documents that clearly prove this was no sham transaction," but that Woodlawn first wants confidentiality for the "gentleman who provided the money for the loan."
The loan was dated Aug. 7, 2017, by Woodlawn, five days after the company was incorporated. Around that same time, Manafort, the former chairman of Trump's campaign, was under increasing scrutiny by federal investigators. The Federal Bureau of Investigation had just raided his Virginia home. The loan was secured by a condominium on Baxter Street in Manhattan that was owned by a company controlled by the Manafort family.
Manafort agreed to forfeit the condo and several other properties to the government as part of his September guilty plea. In November, Woodlawn filed a petition to recoup the money it had lent the Manaforts, citing its "first priority security lien" on the property.
Other lenders that filed petitions to recover their interest in Manafort properties are settling with Mueller or are in talks. But prosecutors objected to Woodlawn's request for an immediate ruling that it has a valid lien, saying the company hasn't disclosed who provided the money behind the loan, any proof that money was ever disbursed or other information.
"Combined with the history of loan fraud and admitted sham loans employed by the defendant, such omissions raise factual issues as to whether the loan is a sham transaction," Mueller said his filing, referring to Manafort.
U.S. District Judge Amy Berman Jackson in Washington, who presided over one of Manafort's two criminal cases, will decide whether the government can seek additional documents from Woodlawn and question as many as nine people potentially tied to it.
Jason Maloni, a Manafort spokesman, declined to comment.
Manafort, 69, was convicted in August on tax- and bank-fraud charges, then pleaded guilty in September in another case in which he agreed to forfeit property. He was sentenced this month to seven and a half years in prison.
In their filing Friday, prosecutors cited Manafort's history to suggest that the Woodlawn loan could be a fake, noting that he owned or controlled at least 30 domestic and foreign entities that were used as part of criminal schemes.
In addition, Manafort and his former associate, Rick Gates, "conspired to classify overseas payments from some of these Manafort-controlled companies as 'loans' in order to avoid taxes," prosecutors wrote. "Manafort also made false representations in order to obtain millions of dollars in other loans, they said. (Gates has pleaded guilty and is cooperating with the government.)
Woodlawn, which extended the $1 million loan, was registered on Aug. 2, 2017. It is "a non-transparent company incorporated in Nevada with no apparent place of business and no discernible beneficial owner," prosecutors said.
Prosecutors objected to granting Woodlawn's request for a lien on the Baxter Street condominium because of the questions about the transaction. The Nevada firm provided "sparse and conflicting information regarding Woodlawn's knowledge of the criminal investigation involving Manafort," the government said.
In January, Bloomberg News reported that Woodlawn in 2018 installed a Hollywood bit player named Joey Rappa as its publicly listed managing member. The loan's backer or backers wanted to remain anonymous given the "potential for public embarrassment" due to Manafort's worsening legal woes, Keith Berglund, an attorney for Woodlawn, told Bloomberg in December.
The government now seeks to question Berglund and Rappa, who once worked as a production associate on "The Nutty Professor" and is a former assistant to the actor Keanu Reeves. Berglund said in December that Rappa was briefly made managing member of Woodlawn because "he did not have a high public profile nor any known associations with anyone who was of interest to the special counsel."
When Rappa was selected, Berglund didn't know he was working on a movie with Andrew Intrater, an American financier who is a cousin of Russian billionaire Viktor Vekselberg, Berglund said. Intrater is chief executive of Columbus Nova, a New York-based investment firm that has managed money for Vekselberg's Renova Group.
Berglund declined to comment, citing Smith's response. A lawyer for Rappa didn't respond to a request for comment. Intrater's name isn't mentioned in Friday's filing, and a spokesman said it was "wrong" to include Intrater in news accounts about the transaction. Intrater had nothing to do with the Woodlawn loan, his lawyer and Berglund have said. Rappa severed his ties with Woodlawn in December, following inquiries from Bloomberg.