Jail time for Calk? Manafort banker's bribery case could turn on intent

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Stephen Calk’s meeting with Paul Manafort in May 2016 looked like a routine encounter between a banker and a potential client — the two men dined together at Capital Grille in lower Manhattan.

But their conversation allegedly turned to a topic that held peril for Calk. “I know that politics came to the surface,” one of Calk’s former colleagues testified at Manafort’s trial last August.

Three years later, federal prosecutors in New York charged Calk, the former CEO of The Federal Savings Bank, in an alleged bribery scheme.

Calk is accused of approving multimillion-dollar loans to Manafort — the onetime Trump presidential campaign chair who was later convicted of a slew of financial crimes — in exchange for a seat at the table in Washington.

Prosecutors also contend that Calk told an untrue story to banking regulators, although they have not charged him with making false statements to government officials.

Calk has entered a not guilty plea. On Wednesday, U.S. District Judge Lorna Schofield scheduled a status conference for July 11 and ordered that discovery in the case be completed by Aug. 26.

The federal law that Calk is accused of violating carries stiff penalties — the statutory maximum is 30 years in prison — but violations can be relatively hard to prove because prosecutors are required to establish that the defendant had a corrupt state of mind.

Known as the Bank Bribery Act, the law makes it illegal under certain circumstances for bank officials to solicit, demand or accept something of value from bank customers. The law was amended in the 1980s to establish that the solicitation, demand or acceptance of something of value is only illegal if it is done with corrupt intent.

Subsequent guidelines from bank regulators have made clear that in some situations — for example, in celebration of a birthday, wedding or job promotion — it is acceptable for bankers to accept reasonably sized gifts from their customers.

The anti-bribery law should have been familiar to Calk before his indictment. After receiving a commitment in 2012 from the city of Chicago to provide millions of dollars in public subsidies for job-training purposes, his bank submitted a budget to the city that included $18,750 to pay for training for 250 employees in how to comply with the Bank Bribery Act.

Over the years, federal prosecutors have used the Bank Bribery Act to bring criminal charges against both CEOs and relatively low-level bank employees.

In one case from 2010, a former loan officer at First Federal Bank in Tennessee was charged with accepting cash bribes — usually between $2,500 and $3,000 — to approve fraudulent loan applications. He eventually pleaded guilty and was sentenced to 18 months in prison.

In another case that came in the wake of the financial crisis, Charles Antonucci Sr., the former CEO of Park Avenue Bank in New York, was arrested on charges that included bank bribery, embezzlement and self-dealing.

Antonucci was accused in one instance of authorizing an extension of overdraft credit to a customer in exchange for the use of the customer’s private plane. He pleaded guilty and was eventually sentenced to 30 months in prison.

Just this week, federal prosecutors in New York charged Edward Shin, the CEO of Noah Bank in Elkins Park, Pa., with taking bribes in connection with the bank’s issuance of loans that were guaranteed by the U.S. Small Business Administration.

Calk’s prosecution figures to attract far more attention than most bank bribery cases, given its connection to President Trump’s political orbit.

Over the summer of 2016, after the dinner meeting in Manhattan, Calk was appointed to then-candidate Trump’s economic advisory council, allegedly just days after Federal Savings conditionally approved its first loans to Manafort.

And shortly after Trump was elected president, at a time when prosecutors allege that a second set of loans to Manafort was pending the bank’s approval, Manafort recommended Calk for a job in the incoming administration.

Jobs that were discussed as possibilities for Calk included Treasury secretary, Army secretary and secretary of Housing and Urban Development, according to testimony and evidence at Manafort’s trial. Calk was eventually interviewed for under secretary of the Army, prosecutors allege, though he did not ultimately get a job in the Trump administration.

Prosecutors contend that Calk was aware of certain “red flags” regarding Manafort’s ability to repay the loans, including a history of defaults.

“Calk understood that the borrower urgently needed these loans in order to terminate or avoid foreclosure proceedings on multiple properties,” the indictment states. “Further, Calk believed that the borrower could use his influence with the Presidential Transition Team to assist Calk in obtaining a senior administration position.”

Assuming Calk’s case goes to trail, it may hinge on whether jurors believe he had a corrupt intent when he approved the loans, which eventually went delinquent.

“Bottom line, the guy has made a living making good loans. Here, he made a series of incredibly bad ones to a guy who Google would tell him he’s buying into a problem,” said John Moscow, a former prosecutor in the New York County District Attorney’s Office.

But Jeremy Margolis, an attorney who represents Calk, argued last week that the loans were not a bribe. His comments suggested that defense lawyers plan to argue that Calk did not have a corrupt intent when he approved the loans.

“The loans made to Mr. Manafort by The Federal Savings Bank were good loans: over-collateralized, approved by the bank’s loan committee with high rates of interest and huge cash prepayments, and approved by the underwriters as being well within the bank’s underwriting guidelines,” Margolis said in a written statement to news media.

Margolis added that Calk’s desire to serve his country was what sparked his interest in getting a job in the Trump administration.

“The bank’s loans to Mr. Manafort — who by then had been terminated from the Trump campaign — had nothing whatsoever to do with Mr. Calk’s desire to serve,” the lawyer’s statement read.

Prosecutors have not charged Calk with making false statements to the government, though the indictment states that Calk told mistruths to the Office of the Comptroller of the Currency in an effort to conceal the bribery scheme.

“Among other things, Calk falsely stated to the OCC regulators that he had never desired a position in the presidential administration,” the indictment states.

Bankers who make false statements to their regulators can be charged under a federal statute that carries a penalty of up to five years in prison, said V. Gerard Comizio, a lawyer at Fried Frank.

“It doesn’t have to be a formal investigation,” Comizio explained. “It could just be banking regulators going about their normal function as banking regulators.”

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