Friday, March 31, 2017

A Chicago Lending Connection to Paul Manafort


Paul Manafort Received Loans From Another Former Trump Adviser's Bank


03/29/2017 | 05:45am EDT

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A foreclosure proceeding on the Brooklyn house was withdrawn in January.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,, named for the property's address.

--Jim Oberman and Peter Nicholas contributed to this article.

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