Last week’s latest indictments by special counsel Robert Mueller added dozens of new counts to the charges already leveled against former Trump campaign manager, lobbyist Paul Manafort and his disloyal deputy Rick Gates, who pleaded guilty late last week. Manafort, arraigned Wednesday morning, maintains his innocence in the face of these new charges, which cover close to $30 million he made consulting in Ukraine and allegedly laundered with Gates’s help.
The new charges, filed last week in Virginia, outline Manafort’s complex money-laundering scheme. The previous indictment, filed in Washington, D.C., in October, focused on his failure to disclose foreign lobbying—with some money laundering charges tacked on as a teaser of sorts for the indictment to come. Much of the money now in question was allegedly spent on real estate that Manafort later leveraged, fraudulently, for bank loans to tide him over during a reported dry spell. But last week’s charges also treat as undeclared income some rather strange personal-use spending the October indictment initially exposed: Significant millionsI for material goods and services over the course of several years—clothes, home improvements, and perhaps most curiously, more than $1 million in Persian rugs from an Alexandria, Virginia retailer.
The new charges alleging a decade-long laundering scheme are air-tight enough, per veteran IRS investigator John Madinger, to pressure Manafort to follow Gates in cooperating with Mueller’s broader investigation into the Trump campaign’s ties to Russia. But they don’t clarify the confusing problem that, according to the Persian rug merchants who own businesses in the Beltway exurb, you can’t legitmately buy $1 million worth of rugs in Alexandria.
“The fact that they acquired personal use from the funds made them ‘income,’ which they failed to report on their tax returns,” Madinger wrote in a recent mail to THE WEEKLY STANDARD, explaining the indictment. In other words, these charges didn’t tell us anything new about the nature of Manafort’s rug splurge.
But: “There could be trade-based value transfer involved,” said money laundering expert and veteran Treasury Special Agent John Cassara. “Which is often used in hawala countervaluation or settling accounts between brokers.”
Hawala, a particular focus of U.S. counterterrorism efforts in the last decade, involves the movement and storage of capital in material goods of fungible value, such as watches, antiques, or fine Persian rugs. Hawaladars undervalue or overvalue goods to stand in for money at the agreed-upon amount. Cassara describes a vast global banking network, based on trust—it exists entirely underground and persists almost always undetected.
In order to call these exchanges of untaxed Ukrainian funds for good and services “hawala,” one would have to prove that—beyond buying personal-use goods, like rugs, with the money—Manafort and Gates were part of an underground countervaluation network. Although, it’s not the charge Manafort’s being arraigned for,
it’s a common practice for those moving money from Central Asia and the Middle East, according to a former middleman for the Iranian regime who spoke to TWS last year on the condition of anonymity.
What’s in question here—simple money laundering—is more widely understood than the trade-based version. Per the indictment: They “funneled millions … into numerous foreign nominee companies and bank accounts, opened by them and their accomplices in nominee names and in various foreign countries, including Cyprus, Saint Vincent & the Grenadines (Grenadines), and the Seychelles,” and “hid the existence and ownership of the foreign companies and bank accounts, falsely and repeatedly reporting to their tax preparers and to the United States that they had no foreign bank accounts.”
Basically, they made a lot of money and lied about it to avoiding paying taxes. And, the charges go on: “In furtherance of the scheme, Manafort used his hidden overseas wealth to enjoy a lavish lifestyle in the United States, without paying taxes on that income.” Buying rugs, clothes and home-improvement—“payments wired from offshore nominee accounts to United States vendors”—was just another straightforward way to clean those foreign millions.
And yet, as Cassara writes in a recent article on Manafort’s scheme, money launderers usually get away with it, unless they’re stupid or unlucky. Had he been savvier, hawala would have been a convenient method in Manafort’s case. Typically, for money laundering crimes of the scale here alleged, it’s an effective one. The government’s enforcement efforts fail 99.9 percent of the time, he pointed out—renewing his call for greater trade transparency to crack down on widely undetected money-laundering practices, like hawala.
Perpetrators don’t get caught: “Trade-based money laundering and value transfer is also the largest money laundering methodology but ironically it is the least understood, recognized, and enforced,” Cassara explained to me. So, were Manafort and Gates exceptionally unlucky to be caught up in the Trump-Russia scandal after years of criminally creative bookkeeping? Or, were they exceptionally untalented criminals? The Iranian ex-money launderer, when last we spoke, leaned heavily toward the latter.
It pained him, a retiree with a keen eye for the covert capital transfer, to see a solid scam blown open by one man’s carelessness. Looking at the last indictment back in October, “I was surprised this guy, the famous lobbyist working with the Ukrainian government, could not hide his transactions,” he said. “These schemes, if you want to do it right, you need a proper tax adviser.”
