New charges pose a risk for banks
Recently NEW filed federal charges against President Donald Trump’s ex-campaign chairman Paul Manafort could also pose legal and regulatory risks for the banks that loaned him millions of dollars against his New York real estate in recent years.
The most serious exposure may be for a Rhode Island-based bank that employed a “conspirator” in Manafort’s scheme to obtain a loan he couldn’t afford, according to the 32-count new indictment unsealed this week.
Dubbed “Lender B” in court papers, Citizens Bank not only lent Manafort $3.4 million based off of fraudulent documents but, in another case, appeared to help Manafort avoid being caught by sending back a crudely falsified financial statement that had been sent to them from a Manafort associate, according to federal prosecutors.
“Looks Dr’d,” the unnamed banker allegedly wrote. “Can’t someone just do a clean excel doc and pdf to me??”
Peter Lugcht, a bank spokesman, declined to acknowledge that Citizens was “Lender B” or answer questions about whether Citizens had reported the alleged loan application fabrications to the government. He also wouldn’t say whether it still employed the person identified as a conspirator.
The Associated Press identified “Lender B” and other unidentified banks referenced in court papers by cross-referencing loan amounts and dates described in the indictment with publicly available property records in New York City.
Experts told The AP the bank’s behavior as described in the indictment will cause problems for it beyond a possible loss on its loan, drawing scrutiny from the Office of the Comptroller of the Currency.
“I would expect the OCC upon reading this indictment or news accounts of the indictment to immediately launch an investigation of what went on,” said Kevin Handly, a banking lawyer and former senior attorney for the Federal Reserve Board.
Details of Manafort’s banking habits were laid bare in the court papers filed by Robert Mueller, the special prosecutor investigating Russian ties to Trump.
His longtime deputy, Rick Gates, pleaded guilty Friday and will be cooperating with Mueller’s probe.
Along with the prospect that one of Citizens’ employees allegedly aided an attempt to commit loan fraud, the details in the indictment indicate the bank failed to heed the results of its basic due diligence, eventually lending Manafort $3.4 million despite twice having reason to be wary of Manafort’s creditworthiness, prosecutors said.