Real Estate, Karachi & Friendly Lending

On Friday October 27, 2017, news broke that the first charges by the Mueller investigation had been approved by a federal grand jury.  At the time of this writing, it is not public knowledge who will be the first to be taken into custody, though an arrest is expected as soon as this coming Monday.  

The following is a compilation of 377UNION’s research to date.  This is far from the complete universe of facts related to Manafort’s financial and real estate transactions, but our hope is that this compilation will provide readers with context and allow additional connections to be made as new stories emerge.

The first section is analysis of patterns and common themes that we have identified, followed by a timeline with links to source documents.

If you have any comments or questions, please reach out via email.

Common Themes

Unexpected Liquidity Crises Across Two Decades.  

In two distinct periods, 2003-04 and 2016, Paul Manafort appears to face unexpected liquidity crises which trigger mortgage defaults, foreclosure actions and lawsuits.  By 2003, Manafort had established himself as a successful political strategist and lobbyist.  At the time, he owned at least four properties, including (i) a home in Alexandria, Virginia, (ii) a vacation home in Bridgehampton, New York, (iii) a horse farm in Lorton, Virginia and (iv) a horse farm in Wellington, Florida.  But in October 2003, Manafort is unable to make monthly mortgage payments on the Wellington horse farm (purchased with a $711,000 mortgage in 1999) and the Wellington mortgage goes into default.  In February 2004, Manafort borrows $2.8 million from BB&T(while BB&T is still moving forward with a foreclosure action on the Wellington property), secured on the 9357 Mount Vernon Circle property.  This amount appears to exceed the market value of the property; it sold for only $1.5 million 11 years later.  In July 2004, Thomas J. Barrack, a wealthy friend of Manafort, assumes from Emigrant Savings Bank Manafort’s mortgage on the Bridgehampton property and provides an additional loan of $389,002.  In 2016, a number of LLCs connected to Manafort default on mortgage loans.  Shortly thereafter, Manafort begins to borrow large amounts secured by his real estate portfolio.  In the case of the 377 Union Street, the amount borrowed ($6.9 million) appears to exceed the market value of the property (purchased for $2.95 million in 2012)

Expectation of Scrutiny May Trigger Liquidity Crisis.  

The two known periods of apparent financial distress are preceded by international events that signaled Manafort’s finances may have been (and subsequently were) subject to scrutiny by prosecutors and investigators.  In May 2002, a suicide bomber in Karachi, Pakistan killed 11 French naval engineers that were working on a billion dollar submarine deal.  French prosecutors have undertaken a 15-year long investigation into the “Karachi affair” to determine if (i) the attack was retribution for France’s decision to stop paying commissions to Pakistani intelligence and military officials and (ii) the commissions made their way back to France in violation of campaign finance laws.  During the course of the investigation, Manafort admitted to receiving hundreds of thousands of dollars from one of the two middle men who facilitated the transaction.  The middle man, Abdul Rahman al-Assir, was a close friend of Manafort and provided a secured real estate loan to Manafort in the midst of the first of two financial crises.  

In January 2016, Manafort and Yohai purchase an $8.5 million property with at least a $2.7 million downpayment.  Between March 2016 and June 2016, word begins to circulate Kiev about the existence of the “black ledger” showing $12.7 million of “off the books” payments to Manafort.  By June 2016, MC Brooklyn Holdings, LLC fails to make scheduled monthly payments on the mortgage secured by the 377 Union Street property.  On August 14th, the New York Times publishes the “black ledger” article and shortly thereafter Notices of Default are filed in Los Angeles County with respect to all of the Los Angeles properties.  

Cash Collateral Loans.

In instances where the amount borrowed as a mortgage loan is close to or exceeds the value of the underlying real estate security interest (e.g., Federal Savings Bank loans secured by 377 Union Street and 174 Jobs Lane), the documentation indicates that there was a significant cash collateral component to the loan transaction. The 2004 BB&T mortgage secured on the 9357 Mount Vernon Circle property may have also included a cash collateral component (the loan amount greatly exceeded the property’s market value).  This additional security makes sense from the lender’s perspective, but raises questions regarding the borrower’s need for liquidity given access to the funds serving as cash collateral.  These cash accounts offered as collateral may not in fact be readily accessible by Manafort, or they may be offshore accounts that can be offered as collateral without triggering a tax event.  Another possibility is that the cash does not actually stay in the lender’s control for the life of the loan, effectively undercutting its value as collateral, but legitimizing the mortgage transaction on paper at the time of borrowing.

Unusual Use of Loans.  

On December 20, 2016, a day before the LLCs holding the Los Angeles properties file for Chapter 11 bankruptcy protection, a number of Deeds of Trust are filed with Los Angeles County to perfect security interests with respect to prior loans to the LLCs from Paul Manafort, Kathleen Manafort and Jessica Manafort.  The LLCs appear to be financed, majority-owned and controlled by some combination of Jeffrey Yohai and Paul Manafort.  If these were truly investment properties for Yohai and Manafort, it’s unclear why a controlling stakeholder would loan funds to the LLCs instead of provide funds via an equity investment which would capture upside when the property was sold.  If funds from Paul Manafort, Kathleen Manafort and Jessica Manafort were intended to be secured loans then why did these lenders fail to file the Deeds of Trust until just before the bankruptcy filings?

Manafort and Yohai:  From Business Partners to Adversaries

It appears that Manafort provided financing and direction behind Yohai’s real estate business.  Other than Dustin Hoffman’s $3 million investment in 1550 Blue Jay Way, all down payments for the Los Angeles properties can be traced back to cash infusions (papered as secured loans) from Paul Manafort, Kathleen Manafort and Jessica Manafort.  Hacked text messages from Andrea Manafort’s phone show that (i) Jessica Manafort believed that Manafort and Yohai were 50/50 business partners in the Los Angeles real estate business and (ii) Manafort traveled to Los Angeles to help Yohai reorganize Marin West’s real estate portfolio.  Yohai and Manafort share a real estate lawyer, Bruce Baldinger.  Baldinger is also defending Yohai in a civil suit brought by Guy Aroch, a New York-based photographer.

By August 2017, reports emerged that Special Counsel Robert Mueller’s team had attempted to gain cooperation of Yohai.  In October 2017, Yohai made filings in Federal Bankruptcy Court that Manafort and his advisors had intentionally mislead Yohai and the court.  Throughout the bankruptcy court proceedings Manafort repeatedly attempted to bring the defaulted loans current or buy the properties out of bankruptcy.  On multiple occasions Manafort failed to come up with the necessary financing to close the proposed transaction.  As of this writing, two of the four properties have been foreclosed on and the remaining two will be put up for auction in the coming months.

Paul Manafort’s Real Estate History

1981 – 2016

April 3, 1981: Kathleen and Paul Manafort purchase 9357 Mount Vernon Circle, Alexandria, Virginia for $265,000.  (link)

October 2, 1992: Kathleen Manafort purchases a vacant lot at 174 Jobs Lane in Bridgehampton, New York for $400,000. (link)

October 19, 1993:  Kathleen Manafort borrows $500,000 from Franklin National Bank secured on the 174 Jobs Lane property.  (link)

1994:  France’s DCNS signs a deal to sell three Agosta-class submarines to Pakistan for $996 million.  Commissions of 6.25% or $62.25 million were paid to various senior Pakistani military, intelligence and political leaders.  At the time, such commissions were legal under French law.  France has since undertaken a decade long investigation into whether a portion of the legal commissions were illegally redirected to Édouard Balladur’s presidential campaign.  Paul Manafort was closely associated with the two middlemen in the submarine deal, Ziad Takieddine and Abdul Rahman El-Assir. Manafort says that he was paid by El-Assir to conduct an opinion poll and prepare a campaign strategy for Balladur’s team.  Balladur’s campaign denies ever meeting with Manafort.  (linklink)

1994-1995:  El-Assir transfers about $400,000 to various accounts connected to Manafort, including the accounts of (i) Black, Manafort, Stone and Kelly, (ii) Kathleen Manafort and (iii) Tarrance Group (link)

September 9, 1994:  Kathleen Manafort borrows $150,000 from Franklin National Bank secured on the 174 Jobs Lane property.  (link)

April 23, 1995:  Balladur finishes third in the first round of voting of the 1995 French Presidential Election and is eliminated from contention.  Jacques Chirac and Lionel Jospin advance to the second round of voting. (link)

May 7, 1995: Jacques Chirac defeats Jospin in the second round of voting of the 1995 French Presidential Election. (link)

February 15, 1996:  Kathleen Manafort borrows $500,000 from Crossland Mortgage Corporation secured on the 174 Jobs Lane property. (link)

May 14, 1996:  Kathleen Manafort borrows $400,000 from Merrill Lynch Credit Corporation.  (link)

July 31, 1998:  Ramshead Farms LLC purchases a horse farm at 10800 Belmont Boulevard, Lorton, Virginia for $240,000. (link)

September 20, 1999:  Paul Manafort buys a 5-acre horse farm in Wellington, Florida for $889,000, financed with a $711,000 loan from BB&T Bank. (linklink)

January 20, 2000:  Ramshead Farms LLC borrows $600,000 from BB&T Bank secured on the Lorton, Virginia property. (link)

September 29, 2000:  France implements OECD Anti-bribery Convention legislation outlawing commission of the type used in the 1994 deal for Agosta-class submarines (link)

2001:  According to a French newspaper’s review of unpublished documents, payment of the commission by France to senior Pakistani military and political leaders is stopped at some point in 2001. (link)

February 1, 2001:  Kathleen Manafort borrows $1,407,000 from Emigrant Mortgage Co Inc. secured on 174 Jobs Lane property.  (link)

February 2, 2002:  Linda Otero, a travel agent in Washington, D.C. complains to D.C. Police Sgt. Sheldon Hargrove, supervisor of the Financial Crimes and Fraud Unit, that Manafort owes her as much as $50,000 for airline tickets she bought for Manafort since the Summer of 2001.  Manafort tells the Washington Post that Otero presented him with conflicting bills and he arranged a wire of $18,105.13 to be transferred from the Swiss bank account of El-Assir, a client for whom Manafort took business trips arranged through Otero’s agency. (link)

May 8, 2002:  A car bomb is detonated next to a bus of French military engineers working with Pakistan to design or build one of the submarines that was the subject of the 1994 transaction. (link)  

September 20, 2002:  Manafort borrows $150,000 from Norcrown Bank, a New Jersey-based bank owned by Charles Kushner.  (link)

November 5, 2002:  Ramshead Farms LLC borrows $350,000 from BB&T Bank, secured on the Lorton, Virginia property.  (link)

October 24, 2003:  BB&T Bank notifies Manafort that it is seeking to foreclose on the Wellington property. (link)

February 12, 2004:  Manafort borrows $2,821,000 from BB&T Bank, secured on a property in Alexandria, Virginia. (link)

March 16, 2004:  Manafort borrows $250,000 from Abdul Rahman El-Assir, one of the middle men in the Karachi affair, secured by the same Alexandria, Virginia property. (linklink)

May 5, 2004:  John P. Barbee files a complaint in Federal Court in Florida alleging that the Manaforts owe him money. (link)

July 20, 2004:  Manafort sells the Wellington, Florida property for $1,550,000 and BB&T Bank drops the foreclosure action. (linklink)

July 27, 2004:  Emigrant Savings Bank assigns a $1,370,997 mortgage secured by Manafort’s Bridgehampton property to Thomas J. Barrack.  Thomas J. Barrack also lends an additional $389,002 to Manafort. (linklink)

November 2, 2006:  John Hannah LLC purchases Apt. 43G in Trump Tower for $3,675,000.  (link)

December 8, 2006:  Ramshead Farms LLC borrows $500,000 from Wachovia Bank, NA, secured on the Lorton, Virginia property.  (link)

September 20, 2007:  Paul and Kathleen Manafort purchase 10 St. James Drive in Palm Beach, Florida for $1,500,000.  (link)

October 18, 2007:  Jesand, LLC purchases 123 Baxter Street #5D in New York, New York for $2,545,625.  (link)

February 14, 2012:  MC Soho Holdings, LLC acquires 29 Howard Street #4 in New York, New York for $2,850,000.  (link)

March 6, 2012:  Jesand, LLC enters into a loan facility with Lucicle Consultants Limited, a Cypriot entity, pursuant to which Lucicle Consultants Limited agrees to loan $10,000,000 to Jesand, LLC (link).

April 26, 2012:  First Republic Bank provides a $1,500,000 mortgage loan to MC Soho Holdings, LLC, a limited liability company connected to Manafort. The loan is secured by a condo at 27 Howard Street and its term ends on May 1, 2042. (link)

December 28, 2012:  MC Brooklyn Holdings, LLC purchases 377 Union Street in Brooklyn, NY for $2,950,000. (link)

June 29, 2014:  Mt Yohai LLC purchases vacant lot at 2521 Nottingham Avenue, Los Angeles, California for $770,000.  (link)

July 18, 2014:  Mt Yohai LLC borrows $748,216 from Kathleen Manafort, secured on the 2521 Nottingham Avenue property.  A corresponding Deed of Trust was filed with Los Angeles County on December 20, 2016.  (link)

September 17, 2014:  Mt Yohai LLC borrows $400,000 from Abra Mgmt Inc., secured on the 2521 Nottingham Avenue property.  (link)

November 28, 2014:  2401 Nottingham LLC purchases a single family home at 2401 Nottingham Avenue in Los Angeles, California for $3,200,000 with a $3,500,000 loan from Genesis Capital Master Fund II, LLC.  (link)

April 7, 2015:  UBS Bank USA provides a $3,000,000 mortgage loan to Manafort.  The loan is secured by a condo in Trump Tower and its term ends on May 1, 2040. (link)

May 29, 2015:  Mt Yohai LLC borrows $715,000 from Genesis Capital Master Fund II LLC, secured on the 2521 Nottingham Avenue property. (link)

June 25, 2015 (approx.):  DJ Blue Jay Way LLC (entity controlled by Dustin Hoffman) invests $3,000,000 in 1550 Blue Jay Way LLC.  A corresponding Deed of Trust was filed with Los Angeles County on February 11, 2016.  (linklink)

June 30, 2015:  Paul Manafort and Kathleen Manafort purchase a three-bedroom condo in Alexandria, VA for $2,700,000. (link)

December 8, 2015:  2401 Nottingham LLC borrows $470,578 from Jessica Manafort, secured on the 2401 Nottingham Avenue property. A corresponding Deed of Trust was filed with Los Angeles County on December 20, 2016. (link)

January 28, 2016:  779 Stradella LLC purchases a one family house located at 779 Stradella Road, Los Angeles, California for $8,500,000 with with a $5,950,000 loan from Genesis Capital Master Fund II LLC. (link)

February 18, 2016:  2401 Nottingham LLC borrows $3,737,100 from Genesis Capital Master Fund II LLC, secured on the 2401 Nottingham Avenue property (refinance of prior loan). (link)

March 4, 2016:  Citizens Bank N.A. extends an additional $1,230,000 loan on the 27 Howard Street property.  After this transaction, a total of $2,730,000 is available for borrowing on the 27 Howard Street property.  The term ends on April 1, 2046.  (link)

March 4, 2016:  Genesis Capital, a “private money lender for professional investors” (link), provides (i) a mortgage loan for $3,897,468, personally guaranteed by Yohai and Jess Manafort and (ii) a mortgage loan for $1,402,532, personally guaranteed by Manafort, to MC Brooklyn Holdings, LLC, a limited liability company connected to Manafort and Yohai.  The loans are secured by the 377 Union Street property.  The term ends on March 7, 2017 and the interest rate is 9.99%. (linklinklink)

March 28, 2016:  2401 Nottingham borrows $1,000,000 from RS Lending Inc., secured on the 2401 Nottingham Avenue property. (link)

March 29, 2016:  Trump announces Manafort as Campaign Convention Manager. (link)

March 30, 2016:  779 Stradella, LLC borrows $2,709,690 from Paul Manafort, secured on the 779 Stradella Road property. (link)

Summer 2016:  Word circulates in Kiev that Manafort has been receiving threatening messages about his work in Ukraine. (link)

April 19, 2016:  1550 Bluejay Way LLC borrows $884,000 from RS Lending Inc., secured on the 1550 Bluejay Way property.  (link)

June 1, 2016:  MC Brooklyn Holdings, LLC fails to make its scheduled monthly payment on the Genesis Capital loan.  (link

June 20, 2016: Manafort replaces Corey Lewandowski as Trump campaign manager. (link)

August 14, 2016:  The New York Times publishes “Black Ledger” article. (link)

August 16, 2016:  Genesis files a Notice of Default with respect to 779 Stradella Road. (link)

August 18, 2016:  Genesis files a Notice of Default with respect to 1550 Blue Jay Way.  (link)

August 19, 2016:  Manafort resigns from the Trump campaign; forms Summerbreeze, LLC; Genesis files a Notice of Default with respect to 2521 Nottingham Way.  (link)

August 30, 2016:  Genesis files a Notice of Default with respect to 2401 Nottingham Avenue.  (link)

September 12, 2016:  Summerbreeze, LLC borrows $3.5 million from SIII Capital Group, LLC, an entity connected to Spruce Capital. (link)

September 20, 2016:  Genesis Capital files a complaint in state court in Brooklyn and attempts to initiate foreclosure proceedings on the 377 Union Street property. (link)

November 17, 2016:  Guy Aroch, a New York-based photographer, files a complaint in federal court accusing Yohai of “operating a Ponzi scheme” whereby Yohai meets public figures and celebrities through Manafort, lures them into the scheme with “claims of quick success — and repays his earlier investors with incoming funds.” (link)

November 18, 2016:  Kathleen Manafort transfers 174 Jobs Lane property to Summerbreeze, LLC. (link)  (The transfer was not recorded until December 9, 2016)

November 23, 2016:  2401 Nottingham LLC borrows $242,681 from Paul Manafort, secured on the 2401 Nottingham property.  A corresponding Deed of Trust was filed with Los Angeles County on December 20, 2016.  (link)

December 9, 2016:  The Federal Savings Bank loans $9.5 million to Summerbreeze LLC, an LLC connected to Manafort.  The loan is secured by a property located at 174 Jobs Lane in Bridgehampton.  The term ends on December 1, 2046.  (link)

December 20, 2016:  Four deeds of trust are filed in LA County securing prior loans from Manafort, his wife and daughter to LLCs connected to Manafort and Yohai.  (linklinklinklink)

December 21, 2016:  The same LLCs connected to Manafort and Yohai file for bankruptcy protection. (link)

January 4, 2017:  MC Brooklyn Holdings, LLC transfers the 377 Union Street property to Manafort. (link

January 17, 2017:  The Federal Savings Bank provides to Manafort and his wife (i) a mortgage loan of $5.3 million (apparently to refinance the Genesis Capital loan) and (ii) a mortgage loan of $1.2 million.  The loans are secured by the 377 Union Street property.  The debt must be paid in full by January 4, 2018. (linklink)

May 30, 2017: Former French prime minister Edouard Balladur charged over the alleged kickbacks from Pakistani submarine deal suspected of having partly funded his failed 1995 presidential bid, in connection with which Manafort has stated he received payment for polling services. (link)

July 19, 2017:  The New York Times publishes the Cyprus records story showing, among other things, that Jesand, LLC borrowed $10,000,000 from Lucicle Consultants Limited, a Cypriot entity (link).

July 26, 2017:  The Federal Bureau of Investigation conducts a pre-dawn raid of Manafort’s condo in Alexandria, VA (link).

August 2, 2017:  Woodlawn, LLC is formed as a Nevada limited liability Company (link).

August 7, 2017:  Jesand, LLC borrows $1,025,000 from Woodlawn, LLC, secured on 123 Baxter Street, Apt. 5D (link).

August 10, 2017:  Manafort parts ways with his lawyer, Reginald Brown of Wilmer Hale and engages Kevin Downing, formerly of Miller & Chevalier (linklink).