By Michael Rothfeld
Paul Manafort, the onetime campaign chairman for President
Donald Trump who did lucrative consulting for Ukrainian tycoons,
faced foreclosure on several real-estate investments but received a
$16 million lifeline through another former Trump adviser, real
estate and court records show.
Mr. Manafort was at risk of losing both his Brooklyn, N.Y.,
townhouse and his family's investments in California properties
being developed by his son-in-law, the records show.
But in November and January, Mr. Manafort and his wife received
as much as $16 million in loans from the Federal Savings Bank, a
small bank in Chicago run by Steve Calk. The loans equaled almost
24% of the bank's reported $67 million of equity capital.
Mr. Calk was a member of Mr. Trump's Economic Advisory panel who
overlapped with Mr. Manafort on the Trump campaign. Messrs.
Manafort and Calk knew each other before the campaign, a person
familiar with the relationship said.
A foreclosure proceeding on the Brooklyn house was withdrawn in
January. Mr. Manafort also planned to put more money into the
California investments to salvage them, bankruptcy-court filings
show.
In an interview, Mr. Calk said the loans to Mr. Manafort were
"absolutely not" related to his role in the campaign. He said the
loans were "grossly overcollateralized," with multiple properties
securing them.
The loans show how Mr. Manafort, who resigned under pressure
from the Trump campaign in August over his activities in Ukraine,
continued to tap connections from Mr. Trump's circle.
Mr. Manafort, a political consultant and investor, declined to
be interviewed. In a statement, he said he had borrowed at 7.25%
interest on the Brooklyn property, a higher-than-market rate, in
what he called a "straightforward" transaction.
Mr. Manafort said those loans were based on the estimated value
of the Brooklyn house after a renovation, work that stalled last
year amid the financial problems. He said he hoped to complete the
construction within a year.
The statement said the loans "all reflect arm's-length
transactions."
Around the time Mr. Manafort was dealing with Mr. Calk's bank,
he was telling associates of plans for potential private equity
deals with Thomas J. Barrack Jr., a wealthy real-estate investor
who backed Mr. Trump, The Wall Street Journal has reported. Mr.
Barrack, a Trump adviser who was his inaugural committee chairman,
has said through a spokesman he has no business relationship with
Mr. Manafort and none planned.
In 2004, Mr. Barrack -- a longtime friend of Mr. Manafort who
suggested he join the Trump campaign early last year -- gave Mr.
Manafort's wife a $1.8 million private loan secured by real estate,
according to mortgage records filed in Suffolk County, N.Y. The
loan was settled two years later, the records show.
Since the mid-2000s, around the time Mr. Manafort started
working as a political adviser to wealthy pro-Russia politicians in
the Ukrainian Party of Regions, he and immediate family members
bought at least six properties in New York, Florida and Virginia
for more than $16 million, property records show.
Mr. Manafort's recent financial problems relate to loans taken
out to support the development projects of his son-in-law, Jeffrey
Yohai.
Mr. Yohai began borrowing two years ago from Genesis Capital, a
California lender, to flip high-end properties in Los Angeles,
according to promotional material for the properties, loan records
and bankruptcy-court filings. Mr. Manafort, his wife and daughter
put about $4.2 million into those projects, bankruptcy-court
records show.
Genesis declined to comment. Mr. Yohai couldn't be reached. Mr.
Manafort's spokesman said his wife and daughter declined to
comment.
Early last year, Genesis lent $4.4 million secured by Mr.
Manafort's Brooklyn townhouse, according to court records. Those
proceeds supported Mr. Yohai's projects, according to Matthew
Browndorf, a lawyer and investor working with Mr. Manafort.
The New York and California loans went into default last year as
Mr. Yohai ran short of cash, said people familiar with the
transactions.
Genesis started foreclosure proceedings in Brooklyn in
September, New York state court records show. In California, Mr.
Yohai filed for corporate bankruptcy in December as Genesis was
moving to foreclose on those properties as well, court filings
show.
As financial troubles mounted, Mr. Manafort turned to Mr. Calk's
bank, Federal Savings. In late November, he and his wife borrowed
$9.5 million from the bank, with two other homes they own and
$630,000 in a bank account to be used as collateral, property
records in Virginia and New York show.
On Jan. 17, the Chicago bank agreed to loan them up to $6.5
million more, which records show was secured by the Brooklyn
property and $2.5 million in cash the couple agreed to deposit into
an account. The next day, Jan. 18, Genesis agreed to withdraw the
foreclosure action in Brooklyn, according to court records.
Mark Williams, a Boston University professor and former Federal
Reserve bank examiner, said the request for the loan on the
Brooklyn house should have raised red flags at Federal Savings
Bank.
He said the default and foreclosure proceedings on the house
demonstrated an inability or unwillingness to repay the loan.
Lending almost 24% of the bank's reported equity capital to one
borrower was risky for the institution, said Mr. Williams, who has
publicly criticized Mr. Trump's economic policies.
Mr. Calk said the loans to Mr. Manafort were an insignificant
part of his bank's lending business.
When debris at the Brooklyn site drew complaints recently, two
lawyers living in Brooklyn, Julian Russo and Matthew Termine, dug
into Mr. Manafort's real-estate transactions and discovered the
loans from Mr. Calk's bank. They posted their findings on a
website, 377union.com, named for the property's address.
--Jim Oberman and Peter Nicholas contributed to this
article.
(END) Dow Jones Newswires
March 29, 2017 05:44 ET (09:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.