Law & the Courts

The Bannon Indictment

Steve Bannon at CPAC 2017. (Gage Skidmore)
If there are convictions, the potential penalties are severe.

NR’s Zachary Evans has reported on the Justice Department’s indictment of former Trump campaign manager and White House adviser Steve Bannon, along with three codefendants — Brian Kolfage, an Air Force vet who became a triple-amputee serving in the Iraq War; Andrew Badolato, a longtime Bannon associate; and Timothy Shea, who helped Kolfage establish “We Build the Wall,” the campaign said to be at the center of the alleged fraud scheme.

The indictment unsealed today elucidates that a great deal of investigative scutwork went into this case, chiefly by the U.S. postal inspectors and prosecutors from the U.S. attorney’s office for the Southern District of New York. Indeed, the investigation was plainly in gear last autumn: The indictment says that in October 2019, the defendants were tipped off by a financial institution that they were under investigation. The wire-fraud and money-laundering charges were a long time coming, and the postal inspectors appear to have meticulously traced the proceeds through numerous bank accounts, real-estate parcels, and at least one vehicle. These are itemized in the indictment’s forfeiture allegations, which are in addition to the significant imprisonment and staggering fines that could result in the event of convictions.

The scheme is big but not complicated. According to the indictment, in late 2018, Kolfage, with the help of Shea and others, established a campaign originally called “We the People Build the Wall” through GoFundMe (described in the indictment as the “Crowdfunding Website”). The concept was that private citizens would contribute money to be donated to the government for the construction of a wall on the southern border. The campaign was instantly successful as a fundraising vehicle, quickly racking up $17 million in commitments, and ultimately $25 million.

For the money to be released, GoFundMe required an entity into which it could be transferred, as well as assurances that the funds would be dedicated to the stated purpose of the campaign. To help him, Kolfage brought Bannon and Badolato (described in the indictment as “an entrepreneur and venture capitalist” — though less flattering descriptions evidently abound).

The latter pair took over the day-to-day organization and operations of the campaign, establishing a new non-profit (under Section 501(c)(4) of the tax laws) called “We Build the Wall Inc.” The organization’s website provides information about the We Build the Wall’s advisory board, which includes, among other well-known figures, former Kansas secretary of state Kris Kobach as general counsel. There is no suggestion in the indictment that any of these other people is complicit in the alleged fraud scheme.

The website strongly associates We Build the Wall with President Trump’s border-wall advocacy, and it prominently features a photo of Donald Trump Jr. joining Kolfage at a 2018 fundraising event, at which he called the effort “private enterprise at its finest.” In a statement after the charges were announced on Thursday, the New York Times reports, Don Jr. said he had no involvement with the effort beyond praising it at the single promotional event. After indicating scant familiarity with We Build the Wall, President Trump said he did not like the effort because it was “being done for showboating reasons,” and because he thought it “inappropriate” to pay for the border wall with private donations.

To get the GoFundMe contributions transferred to We Build the Wall, it was essentially necessary to do a second fundraising campaign because donors would have to “opt in” — i.e., they would have to agree to the transfer.

To persuade donors to do that, the accused schemers solemnly vowed in corporate by-laws, GoFundMe website announcements, social-messaging posts, and other assertions that 100 percent of the contributions would go to wall construction. Contributors were assured that Kolfage would “not take a penny of compensation from these donations,” and would “take no salary.” Bannon is said to have publicly guaranteed, on several occasions, “I did this kind of as a volunteer” and “we’re a volunteer organization.”

Nevertheless, the indictment alleges that the defendants planned to and did divert funds for their own benefit. The principal scheme for accomplishing this allegedly involved paying about $1 million in We Build the Wall funds to another non-profit that Bannon controlled (with Badolato’s assistance). The indictment quotes text messages, some of them quite blunt, that shed light on the movement of We Build the Wall money to “Non-Profit-1,” so that it could then be disbursed to Kolfage. For example, Kolfage is said to have worried in a text to Badolato that tax laws would require We Build the Wall to disclose payments to the non-profit; Badolato is quoted as replying, “Better than you or me lol” — an apparent allusion to the promise that We Build the Wall donations would not be paid to organizers. The indictment alleges that, to camouflage some payments, “Non-Profit-1” issued a fraudulent Form 1099 for Kolfage’s wife, purporting to have paid her for “media.”

The indictment does not identify the non-profit. It is well known that Bannon runs a non-profit organization, Citizens of the American Republic. The indictment says “Non-Profit-1” was established “with the stated purpose of promoting economic nationalism and American sovereignty.” That certainly is COAR’s self-proclaimed mission, and its website has depicted Bannon doing fundraising for We Build the Wall. COAR’s operations reportedly began last summer, but I have not determined when it was formally established. The indictment traces payments from We Build the Wall to the unidentified non-profit back to February 2019.

Other third-party entities are alleged to have been used to conceal We Build the Wall payments to Kolfage, with those entities earning a slice of the diverted funds for their trouble. Shea, for example, is alleged to have created an entity (called “Shell Company-1” in the indictment), which was paid tens of thousands of dollars from We Build the Wall. Much of that money was paid to Kolfage, and Shea’s shell company kept the rest. It is alleged that Badolato similarly used bank accounts that were controlled by two of his associates (not identified in the indictment) to funnel payments.

All in all, Kolfage is alleged to have received over $350,000 and to have spent it on home renovations, boat payments, a luxury SUV, a golf cart, jewelry, cosmetic surgery, personal tax payments, and credit-card debt. More than $1 million is said to have been diverted to Bannon’s Non-Profit-1. Besides paying Kolfage, Bannon is accused of spending donor funds on “personal uses and expenses unrelated to We Build the Wall.” The four defendants collectively received hundreds of thousands of dollars in donor funds, the indictment says, “which they each used to pay for a variety of personal expenses, including . . . travel, hotels, consumer goods, and personal credit card debts.”

The indictment also outlines consciousness-of-guilt proof. Once the defendants were tipped off to the investigation, Kolfage and Badolato are said to have begun communicating via encrypted messaging apps, and secret payments to Kolfage were halted. On the We Build the Wall website, all allusions to the promise that Kolfage would not be paid vanished, while a statement that he’d start being paid a salary in January 2020 was quietly posted.

If there are convictions, the potential penalties are severe. Thus far, prosecutors have brought two charges. Wire fraud carries a potential 20-year term of imprisonment, and money-laundering conspiracy is punishable by up to ten years. More charges could be added since each act of fraud or money transfer could theoretically be charged as a separate felony offense; but while that would increase the statutory exposure to incarceration, it would not change the sentencing guidelines. Just doing a quick back-of-the-envelope calculation, the guidelines — which judges are not required to follow — would call for sentences in the range of ten years (depending on how various adjustments are applied). Fines and forfeitures could run into the millions of dollars.

A final thought. When he initially (and futilely) fought his removal as U.S. attorney for the Southern District of New York, Geoffrey Berman suggested that his continuing presence was necessary to protect the office’s ongoing investigations, including some that might affect allies and associates of President Trump. Attorney General Bill Barr countered that this was nonsense, and that the office’s investigations would continue undisturbed, under the capable supervision of Audrey Strauss, the acting U.S. attorney who was Berman’s deputy.

Obviously, the investigation of the president’s former aide, who — their falling out notwithstanding — has continued to promote the president’s policies as a political ally, continued full speed ahead.

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