• Show Notes
  • Transcript

In this special episode of CAFE Insider, “Bannon Indicted,” Preet breaks down SDNY’s indictment of Steve Bannon, President Trump’s former campaign CEO and White House chief strategist. 

We hope you’re finding CAFE Insider informative. Email us at [email protected] with your suggestions and questions for Preet and Anne. 

REFERENCES & SUPPLEMENTAL MATERIALS

U.S. v. Brian Kolfage, Stephen Bannon, et al. indictment, 8/20/20

President Trump deflects a question about his affiliations with defendants in criminal prosecutions, 8/20/20

Attorney General Bill Barr’s statement about his awareness of the investigation and forthcoming arrest, 8/20/20

Roger Stone’s comment on Steve Bannon’s indictment, 8/20/20

Preet Bharara:

Hey folks, it’s Preet. Imagine my surprise when I wake up this morning, Thursday morning, to the news that there’s a big case out of my old office, SDNY, the Southern District of New York. It’s not just any garden variety case, it’s a case against four individuals, one of whom is an associate of Donald Trump. Not just any associate, but his former campaign CEO, Steve Bannon. A law enforcement agency that worked alongside SDNY to bring these charges is not the FBI, is not the DEA, but is, in fact, the United States Postal Inspection Service, which I think is unrelated to recent news.

Preet Bharara:

A scheme for which these four gentlemen had been arrested relates to a plan to build a wall at the southern border. It’s almost like writers cooked something up that would have been rejected by most Hollywood producers. Let’s discuss what the charges are. All four men, Brian Kolfage, Steven Bannon, Andrew Badolato, and Timothy Shay … By the way, as far as I can tell, not that Timothy Shea who used to be the US attorney in Washington, DC, they’re all charged in two counts, both conspiracy charges. One, conspiracy to commit wire fraud and, two, conspiracy to commit money laundering offenses. Each of those carries a maximum statutory penalty of 20 years so a total potential hypothetical sentence of 40 years if convicted on all counts.

Preet Bharara:

Now, as you know, if you listen to the show, most of the time defendants who are convicted either by trial or by a guilty plea do not get the maximum statutory penalty, but these are serious charges with significant prison sentences awaiting the men if they are convicted. Essentially, the fraud is this. At some point at the end of 2018, the main defendant who is Brian Kolfage, I don’t know if I’m pronouncing that name correctly, decided that he wanted to build an enterprise for the purpose of funding the border wall, which we have been told for years and years was going to be paid for by Mexico. I guess Mexico didn’t fill the bill so Mr. Kolfage decided to step in.

Preet Bharara:

As initial matter, through a crowdfunding website he tried to raise money for this purpose. The initial plan was to collect money and then just basically give it to the federal government, here’s money, now you can go build the wall. That initial crowdfunding enterprise met with a substantial amount of immediate success, $17 million raised from around the country in the first week. What ends up being important throughout every phase of the fraud is that Brian Kolfage and others made public representations again, and again, and again, as follows; that nobody associated with the entity, We Build the Wall, would take a penny in compensation or in salary or in any other kind of remuneration.

Preet Bharara:

In fact, this indictment which goes on for about 23 pages, could have been shorter but the prosecutors from my old office chose to list again and again all the specific representations, and I’ll read a couple of them to you that said they wouldn’t take any money. On page one Kolfage would quote, “Not take a penny in salary or compensation.” “100% of the funds raised will be used in the execution of our mission and purpose.” Steve Bannon publicly stated, as cited in the indictment, “We are a volunteer organization.”

Preet Bharara:

Again, when they started a webpage they made it clear that 100% of your donations would be given to the government for the construction of the wall, and that if the campaign couldn’t attain its goal it would refund every single penny. They eventually created a separate entity and had written bylaws that clearly stated, again, a promise that, “Kolfage will take no salary.” He will personally not take a penny of compensation from these donations.

Preet Bharara:

Over, and over, and over again, Kolfage and others said every penny and donations from around the country for the building of the wall would go just for that purpose, no lining of anyone’s pockets. Those representations turned out to be false, according to the charges out of SDNY. As the prosecutors allege, in case after case, money actually flowed from their enterprise into the pockets of Kolfage, Bannon, and others. In fact, they alleged that Kolfage received about $350,000 in money that was intended for building the wall. He even had an understanding that he would receive a $100,000 up-front payment and then $20,000 a month after that, and it appears that the prosecutors have bank records to prove it.

Preet Bharara:

Steve Bannon received something like $1 million, some of which he paid out to Brian Kolfage and other amounts of which he used for personal expenses for himself. How did they carry off that fraud? Well, a variety of ways. Steve Bannon controlled a nonprofit, which is referred to in the indictment as Nonprofit One, that was paid money by We Build the Wall. The Nonprofit One dispersed these funds to other people, including to Kolfage.

Preet Bharara:

Another thing they did was they made up vendors and false invoices and sent those false invoices for payment when no services were actually provided. That’s a common MO for people who engage in this kind of fraud, in my experience. There were fake vendors, there were fake invoices, they were passed through shell companies, all of which is laid out in great detail in the indictment. What’s the evidence that the prosecutors seem to have? Well, we don’t know the entire scope of it because it’s just the indictment but it’s very clear, based on the specificity of the charges, they have quite a bit of evidence.

Preet Bharara:

They have, among other things, information about the bank accounts. There’s a section at the end of the indictment that relates to asset forfeiture and there is a lengthy recitation of particular bank accounts with particular bank account numbers and property, including a boat or two. That means that the prosecutors probably have all the account information relating to all of those bank accounts so they can see the flow of money from the supposedly nonprofit We Build a Wall Enterprise and Steve Bannon’s nonprofit, and these pass through companies, and the invoices that were being shown, and the bills that were paid in connection with those things, and the personal expenditures of Steve Bannon and others.

Preet Bharara:

Probably have their credit card statements, probably have their personal bank account information as well. That’s pretty strong evidence. They also have text messages between and among several of the defendants. They also have something that’s very important to prosecutors, and that is evidence of mental state, state of mind, meaning that the people involved knew what they were doing was wrong and took pains to try to cover it up.

Preet Bharara:

Some of that evidence, of course, is in the text messages themselves in which they’re talking about keeping things confidential. They’re talking about ways in which they can send money to each other even though it’s not appropriate. There’s another bit of consciousness of guilt evidence that’s kind of interesting too. In paragraph 26 of the complaint, a couple of interesting things are revealed. To people who are wondering how long this investigation was going on, well we know it went back to at least October 2019 and probably many months before that.

Preet Bharara:

How do we know that? We know that because in the indictment it turns out that the defendants discovered that We Build the Wall might be under federal criminal investigation. That’s because one of their banks apparently told them that there were inquiries that were coming in, that we try to avoid when you investigate a case to keep it covert, but sometimes whether appropriately or inappropriately, a third party will let the account holder know that there have been inquiries, maybe that there was a subpoena.

Preet Bharara:

Then something interesting happens. When they were finally alerted to the fact that maybe their scheme is under investigation and they might be getting caught, from the indictment, “Around that time,” meaning October 2019, “And in reaction to the potential investigation, Kolfage and Badolato began using encrypted messaging applications on their phones,” so no longer regular texts that are easier for the feds to look at.

Preet Bharara:

We Build the Wall’s website was changed to remove any mention of the promise that Kolfage was not being compensated and to add a statement that he would be paid a salary starting in January 2020. How convenient. Then the last sentence of that paragraph reads, “Kolfage also stopped receiving secret salary payments after this date.” That, as we say in the industry, is very damning evidence because even if you had some defense of the things that were going on before, if you change course at the moment you think your scheme is being discovered and stop making payments that have been made as a matter of course before that, move to encrypted applications to conceal your activities and to conceal your communications, those are actions of people who knew what they were doing was wrong and will be very powerful evidence in court.

Preet Bharara:

Overall, when people ask what’s the strength of the evidence I would say it’s very, very high. No case is certain and these are mere allegations but the burden for the government is very simple. Clear representations were made in place, after place, after place, time after time, after time, not a penny is going into the pockets of Brian Kolfage and others, 100% is going to Build a Wall. Then, on the other hand, you have all this documentary financial evidence that lots and lots of the money did go into their hands, did go into their pockets. It’s a simple lie, demonstrably provable, and I don’t know what the potential defenses here might be.

Preet Bharara:

Some other questions have been raised about the indictment. One is, did SDNY go ahead and do this, given the sensitivity with respect to Steven Bannon, without letting Bill Barr know. As we’ve been talking about for some weeks, there is a concern that Bill Barr has a sort of protective instinct when it comes to associates and former associates of Donald Trump. My initial inclination this morning was, I don’t know if they told Bill Barr. There’s no regulation that requires notification of main justice for these kinds of charges.

Preet Bharara:

In some ways, despite what I said at the beginning, it is a garden variety fraud case. There’s lots of cases like this where people who are otherwise wealthy commit fraud through their nonprofits. What makes it sensitive, I guess, is the fact that one of the defendants is connected to Donald Trump in a major way. Given how Bill Barr has reached in and it looks like he’s meddling in various US attorney’s offices cases, there’s an argument to be made that maybe they didn’t have to tell him and wouldn’t have told him.

Preet Bharara:

In the last couple of hours Bill Barr has told the press that he has been aware of the case, not briefed regularly, but has been aware of the case for some months so I guess we’ll take that at face value for now. The question of Bill Barr’s involvement and knowledge of the case bears in another question that people have been asking since this morning, and that is, does this have anything to do with the forcible removal of then US attorney, Jeff Berman, about two months ago?

Preet Bharara:

People can speculate and I’ve seen people speculate. I don’t know if that’s the case. I think it’s a legitimate question to be asking, whether or not there was some annoyance at the fact that here was another associate, beyond Michael Cohen, who is being investigated by the Southern District of New York and whether or not the attorney general didn’t think it was an appropriate case, or thought SDNY was being too heavy handed, or didn’t like the timing of how it was going, too quickly or too slowly. It’s impossible to know.

Preet Bharara:

I’m not making any such allegation. I tend to think probably this was one of many things that Bill Barr, at the head of the Justice Department, didn’t like about what SDNY was doing but it’s hard to tell and we’ll have to keep paying attention to that. Before getting to what may come next in the case and what the implications are, I have one non-legal observation to make. That is, the fact that this was the nature of the fraud is such a cynical, brazen, disgusting, you can say, attempt to take money from people who whether they’re right or not believed in this cause of building a wall at the Southern border.

Preet Bharara:

It shows that people like Steve Bannon actually don’t care anything about the agenda that they espouse and they don’t care anything about the people who have followed the President he tried to elect, and successfully did elect. One of the saddest parts of the indictment is the description of how some of these people who were donating money from around the country didn’t have a lot and wanted to be certain that the money was going to be put to the use for which they were sending it. That’s why time and time again they made the statement that they weren’t taking a penny in compensation, that they weren’t taking any salary and all of it was going towards building the wall.

Preet Bharara:

That was a necessary, essential, vital inducement to get these people to give up their hard earned cash. Most of the people who donated were not rich, it seems from the indictment, and for this to be the fraud by which they lined their own pockets to the tune of hundreds of thousands of dollars makes it even more perverse; on top of which, Steve Bannon didn’t need the money. I’ve been asked the same question for years and years, why do people who don’t need the money commit financial crimes to make more money? I still don’t have an answer to that question.

Preet Bharara:

That’s also not going to bode well for them if they decide to go to trial. Juries don’t like rich people committing crimes to get more rich. Trump, for his part, is engaging in the same process he always engages in which is …

President Trump:

He was involved in our campaign, he worked for Goldman Sachs, he worked for a lot of companies. He was involved, likewise, in our campaign and for a small part of the administration very early on. I haven’t been dealing with him at all.

Preet Bharara:

It’s the same old line that Trump always gives. He was asked a question today from a reporter who listed all the other associates of Donald Trump who have been charged or convicted.

Speaker 3:

Respectfully, sir, it’s not just Steven Bannon. It’s Roger Stone, it’s Michael Flynn, it’s Rick Gates, Paul Manafort, Michael Cohen. What’s it say about your judgment that these are the kinds of people [crosstalk 00:13:11]?

President Trump:

Well, I have no idea.

Preet Bharara:

I think you and I have some idea what it says about his judgment. By the way, other reactions are pouring in too and I present without comment what Roger Stone apparently said about the arrest of Steve Bannon. “Karma is a bitch, but I am praying for him”. What’s the future? Well, a court case is going to take a while. Unless there’s a quick disposition, I would imagine a trial date does not get set until the end of the year at the earliest, and that would be very, very, very fast so probably sometime next year.

Preet Bharara:

Will Bill Barr still be the attorney general? Will Donald Trump still be the President? Also unclear. That’s relevant for, among other things, to answer the question that people are asking, “Well, will Donald Trump pardon Steve Bannon and these other folks in advance of a trial?” I don’t know. Of course, the other speculation as always happens in cases like this, will Steve Bannon flip? Will he choose to cooperate with the government? Here, all the considerations that are usually in play are in play again.

Preet Bharara:

On the one hand, Steve Bannon is not a young man, probably doesn’t want to go to prison, the charges are strong, the evidence is quite strong, and to avoid prison time he might want to flip on other people against whom he has usable information. That could be people from the campaign, when he worked on the campaign, that could be the President himself, if there is such information, it could be Jared Kushner, it could be any one of a number of people.

Preet Bharara:

I think the pressure will be very substantial on Steve Bannon to figure out a way to help himself. He doesn’t seem like the kind of person who wants to spend time in prison. Look, this is a very odd thing for Steve Bannon to have done, not only given his wealth but given his position, given his fame, given the amount of scrutiny that is being brought to bear on all sorts of things, including charitable organizations. There was scrutiny of the NRA that’s ongoing by the attorney general of the state of New York.

Preet Bharara:

It’s baffling to a lot of people. Unless you’ve been in the business of prosecuting people, there are people who commit crimes that don’t make a lot of sense and this one doesn’t. That’s not a defense, it doesn’t save you and it’s not going to Steve Bannon. There are reports that maybe other people will be arrested and may be connected to this scheme, we’ll bring you all that in the coming days. I’ll be back with Anne Milgram on Tuesday for an episode of Cafe Insider.

Preet Bharara:

Thanks for listening. As you may have noticed, my friend and co-host and, Anne Milgram, couldn’t join me to record today but will have more analysis for you on next week’s full episode of Cafe Insider. You can now try the Cafe Insider membership free for two weeks. To join, head to cafe.com/insider, that’s cafe.com/insider. To all our insiders, thank you for supporting our work.