We’ve all balked by now at the $15,000 ostrich coat, the tacky $21,000 watch, and the $10,000 karaoke machine in the Hamptons house. Evidence of Paul Manafort’s profligacy abounds amid his ongoing trial. But the $1.03 million Manafort paid to an Alexandria, Virginia rug dealer remains one of his most puzzling bouts of conspicuous consumption.
Court documents reveal THE WEEKLY STANDARD was at least sniffing up the right tree last year: King Street’s J&J Oriental Rug Gallery—whose inventory expert hung up on me when I mentioned Manafort—had ample dealings with the high-flying lobbyist turned Trump campaign chairman. Spending an honest $1 million on oriental rugs in Alexandria would be a challenge and a strange choice for a legitimate collector, TWS reported at the time. And, as TWS later found, Persian rugs are an ideal and hardly unheard of vehicle for trade-based money laundering: The flow of funds the initial indictment showed suggested to expert sources a more complicated underlying exchange.
And Manafort and J&J Oriental Rug Gallery’s dealings were, per the prosecution, in fact quite complicated.
According to one of the exhibits presented last month: “J and J Oriental Rug Gallery and Jesand Investment Corporation, through Mr. Manafort, entered into a loan agreement. Jesand Investment Corporation agreed to loan J and J Rug Gallery $250,000 for investment in oriental rugs in exchange for 40 percent of the profit on any sale of rugs and $500,000 of oriental rugs as collateral.”
The original indictments showed that from 2008 to 2010, and then once more in 2012, Manafort sent an Alexandria rug dealer—J&J Oriental Rug Gallery, we now know—a succession of five- and six-figure payments. And, in 2010, per the prosecution’s evidence, a Manafort shell company and J&J initiated a high-interest quarter-million-dollar loan with a half-million-dollar cache of rugs as collateral. Why?
One veteran money launderer and former adviser to the Iranian regime assures me that, as TWS previously reported, Persian rug purchases are a proven means of moving money free from tax or trail.
“The money the rug business makes is based on the over-invoicing,” said the source, who requested anonymity to speak freely about the tricks of the tax-dodging trade. Laundering money through rug purchases, he explained, “It works like Western Union.” But typically, “on a much, much smaller scale,” than Manafort’s million—and usually not culminating in a $250,000 loan at 40 percent interest.
But by taking a high-interest loan, a rug merchant could at least open an avenue for value transfer separate from suspiciously repetitious rug sales to a foreign-funded LLC.
“You have to find different ways to do this. You cannot do this constantly on rugs,” the money laundering expert explained. “Everybody’s going to launder money through cars, through rugs, through watches—you have to find another way. The loan was a good way. But how many loans can you give? You’re not a bank.”
With no specific knowledge of Manafort’s dealings with J&J beyond that which the court documents have made public, the source said “I am guessing.”
“But I have done this before,” he added. And per his expertise, “[Manafort] seeded the money as a loan, and he wanted returns on it. The returns are not coming from the rug dealer. The returns are coming from his own money stashed in Europe or anywhere in a free-trade zone.” Manafort’s stashes were in Cyprus and the Grenadines, both tax havens.
But, he added, we can’t tell from the documents whether the loan was repaid, and if it wasn’t, what became of the collateral carpets. “You use them to buy things, you sell them in Cyprus,” he hypothesized. Could you pay for renovations to your Hamptons house with rugs? “Under the table, yes. Those carpets were worth half a million based on paper.”
Rugs, he reminds me, work well for low-level laundering because they are worth whatever you say they’re worth. While we may never know what became of Manafort’s loan to J&J Oriental Rug Gallery, there’s one thing, this retired money launderer tells me, we know for sure.
“They were stupid,” he says of Manafort and his associate Rick Gates. “I wish I was their adviser and charged them a million, two million—and they would have not been caught.”
Normally, he tells me, a launderer moving money at their level would hire an independent forensic accountant to fish through their documents. These two clearly didn’t. Why not?
All political operatives are alike, he says by way of explanation: “These political people—I’ve worked with them—they think they’re untouchable.” Manafort’s sloppiness dumbfounds this veteran but belies a hubris he’s seen before.
“I don’t believe he thought that one day he would wind up in jail.”
