(Bloomberg) -- The chief executive of a Chicago bank that loaned $16 million to former Trump campaign chairman Paul Manafort is under scrutiny by Special Counsel Robert Mueller for a bank fraud conspiracy and other unspecified crimes, a prosecutor said.
Stephen Calk, CEO and chairman of Federal Savings Bank, is suspected of plotting with Manafort to defraud his own bank when he pushed approval of the loans in hopes of winning a senior post in the Trump administration, prosecutor Greg Andres said Friday during Manafort’s trial in Alexandria, Virginia.
“Mr. Calk is a co-conspirator, and he participated in the conspiracy to defraud the bank,” Andres said at a sidebar conference outside jurors’ earshot. He later added without elaborating: "Mr. Calk has other criminal liability aside from this bank fraud.”
The disclosure, which appears in a transcript of the day’s proceedings, suggests Mueller may have unearthed more possible wrongdoing by a Trump ally not connected to the core focus of his probe -- Russian interference in the 2016 election. The investigation, which has led to charges against suspected Russian hackers and guilty pleas from former Trump aides for lying to prosecutors, has also spawned other unrelated inquiries against others.
Calk, who owns at least 80 percent of Federal Savings Bank with his brother, served as an economic adviser to Trump’s campaign. He hasn’t been charged with a crime and may never be.
“We’re fully cooperating with the Special Counsel’s office, and in fairness to both sides we cannot make any comment at this time,’’ Calk said Sunday in an interview with Bloomberg News. He declined further comment.
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Paul Fishman, a former U.S. attorney in New Jersey, said it’s uncertain whether prosecutors will charge Calk.
“It means that they technically have enough evidence to charge him,’’ said Fishman. “But a federal prosecutor would not charge someone unless he was convinced that he could prove that person was guilty beyond a reasonable doubt.”
Prosecutors may also have a tactical reason for labeling Calk a co-conspirator. Calling him that allows prosecutors to tell jurors about certain statements Calk made, which would otherwise be inadmissible under federal rules of evidence.
Manafort, 69, is on trial for tax crimes and bank fraud. Prosecutors say he lied about his finances to three lenders in obtaining $20 million in loans, including Calk’s bank. Prosecutors intend to rest their case on Monday. Manafort may then put on defense witnesses. Closing arguments could come as soon as Tuesday.
The sidebar disclosure about Calk came after a witness testified that Calk expedited approval of two loans despite red flags raised by his staff about Manafort’s ability to repay. Calk wanted Manafort to help him after the election get a job as treasury secretary or housing secretary, according to Dennis Raico, a former senior vice president who testified under a grant of immunity. Jurors have also been told that Calk wanted to be secretary of the Army.
At the sidebar, Andres wanted permission for Raico to recount what Calk told him -- a hearsay statement generally not allowed into evidence. A lengthy argument ensued, and at one point Andres appeared to backtrack on his suggestion that Calk participated in Manafort’s alleged scheme to defraud the bank.
“I’m not sure that it’s clear that Mr. Calk is involved necessarily,’’ Andres said.
U.S. District Judge T.S. Ellis III pressed the prosecutor to explain his theory of the conspiracy. Andres said Manafort submitted false financial documents that the bank relied on in deciding whether he was a good credit risk. If the bank knew the documents were false, it wouldn’t have approved the loan, Andres said.
Manafort’s request “didn’t go through the normal process because Mr. Calk was expediting the loan and pushing it through, notwithstanding the red flags,’’ Andres said. “So there was agreement between Mr. Manafort and Mr. Calk to have the loans approved, they were approved, and in turn, Mr. Manafort proposed Mr. Calk for certain positions within the administration.’’
During the sidebar discussion, defense attorney Richard Westling said prosecutors have no evidence that Calk knew Manafort submitted false evidence to the bank.
“I don’t think there’s any evidence of a conspiracy to defraud this bank,’’ Westling said.
The judge said he’d allow Andres to pose the question he wanted, but then said he’d order jurors to disregard Raico’s entire testimony if he later determined there was no conspiracy. Andres elected not to ask the question.
On cross-examination, Westling sought to raise doubts about whether Manafort defrauded a bank over which Calk and his brother have such strong control.
Raico said that before loaning Manafort $9.5 million in the days after the election, the bank secured collateral of $15.5 million, backed by his estate in Bridgehampton, New York, and his condo in Alexandria. Manafort also set aside $650,000 to pay for principal, interest, taxes and insurance in the first year, Raico said.
In early January 2017, Manafort borrowed $6.5 million against a brownstone in Brooklyn, New York. To secure the loan, he put up $2.5 million in cash from the first loan, and the property valued at $6.3 million, or $8.8 million as collateral.
Calk is a former U.S. Army helicopter pilot who is an advocate for the housing needs of veterans. The bank had assets of $265 million through March 31, according to a filing with the Federal Deposit Insurance Corporation.
--With assistance from Andrew Martin.
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