Indictment of Steve Bannon For Wire/Mail Fraud Is "Garden Variety" Federal Prosecution

(AP Photo/J. Scott Applewhite)

 

As has been widely reported, and as my RedState colleague Jeff Charles went through in this story, Steven Bannon and three others — including retired Air Force triple amputee Brian Kolfage — have been indicted on federal charges in the Southern District of New York.  The three are charged in connection with their promotion and operation of a “non-profit” enterprise called “We Build The Wall,” which raised money through a “GoFundMe” campaign that was to go towards building a segment of the Trump Adminstration’s border wall along the Texas-Mexico border.

I’ve been through the allegations of the Indictment unsealed earlier today in New York, and there are some rather obvious — and some “not-so-obvious” — observations at the investigation and indictment.  So in no particular order here are some of my observations:

This case was investigated by the United States Postal Inspection Service.  That is not surprising in the least — this is a type of investigation that the USPIS routinely is involved in, and it is within their statutory mandate.  There is NO conclusion to be drawn from the fact that the FBI does not seem to have participated.  The FBI doesn’t work on every federal case, and other agencies oftentimes work to keep the FBI out of their investigations because the FBI has a tendency to “big foot” cases when they are invited to JOIN an investigation started by another agency.  If USPIS felt like they had this under control, then they would work it alone.  Given that the organization was a registered “non-profit”, I’m certain the IRS was involved as well — especially since the money Bannon, Kolfage, and others took for themselves would be taxable income and I doubt they declared it.  There is no reason for the US Attorney in the SDNY to suggest — or dissuade — involvement by the FBI.  So when you see online speculation that the absence of FBI involvement somehow signifies a lack of trust, the person making that claim either has an agenda for doing so, or they are talking out of their keyster.

This is “garden variety” fraud.  The advent of online fundraising, and the development of sites like GoFundMe have allowed this kind of enterprise to flourish.  Prior to those developments, this kind of fraudulent fundraising was often done through phone-banking.  I fell for such a scam about 20 years ago when I received a call from an organization that “sounded” a lot like a police officer’s benevolent association, raising money for scholarships for the children of fallen officers.  After I pledeged $250 I learned that the organization is basically a scam, with about 90% of the funds raised going into “operational” expenses, and 10% going into the scholarship fund.  The “opeational expenses” included all the phone-bankers, who got a commission on every dollar they raised with a phone solicitation, and the operators of the enterprise who took about 50% of the funds raised in salaries and expense reimbursements.

As a general matter, this kind of “scheme” can walk the fine line between legal and illegal if the promoters and operators just follow a few established rules.  Following those rules keep you off the IRS radar.  Chief among those rules is don’t make knowing falsehoods in your promotional materials — don’t say things like the defendant’s said here such as “100% of the funds raised will be used in the execution of our mission and purpose”, or I’m not taking “a penny in salary or compensation,” if those things are not true.   Making any kind of false representation for the purpose of obtaining money or something of value from another person is the heart of a “scheme to defraud.”  Another rule to follow is be accurate in reporting the amount of money paid to executives of the non-profit.  The IRS would not have batted an eye here if all four men charged had paid themselves $150,000 each a year from the funds raised as compensation for their work.  That would have been a public filing, and exposure of that fact might have dampened contributions some — but they would have still raised a lot of money, and been able to take a decent amount for themsevles — all 100% legal.  It might not have been quite the same amount they took by using false invoices to steer money to shell companies they controlled, but they wouldn’t be facing a decent amount of time in federal prison either.

Notwithstanding all the online caterwauling from the left, the reporting now is that AG Barr was made aware of this investigation several months ago and did nothing to interfere with it.  Some have pointed to his firing of Acting US Attorney in SDNY, Geoffrey Berman, and tried to draw some connection.  But Berman testified before Congress about his meeting with AG Barr earlier in the day prior to Barr announcing Berman’s “resignation” — only to have Berman deny such.  Berman told Congress that he and Barr did not discuss any cases under investigation during that meeting.

As for some deep connection between Bannon and Pres. Trump, the left and the media conveniently all forget that Bannon was a very late addition to the Trump campaign in 2016.  It was August 17, 2016, when it was announced that Bannon was leaving Breitbart News to join the Trump campaign, replacing Paul Manafort who was let go because of increasing controversy over his connections to political actors in Ukraine as a political consultant.  But Bannon was controversial from the start, and he never meshed well with the Trump White Staff after Trump’s victory.  Trump fired him from the White House in August, 2017, so he lasted less than 8 months as a member of the Trump Administration.  In July 2020, Trump criticized on Twitter the “We Build The Wall” campaign orchestrated by Bannon and Kolfage, indicating a lack of approval for such privately financed efforts.

I’ll have more to say as this matter plays out in the weeks ahead.  But right now, as a federal criminal matter, this kind of investigation and prosecutions is pretty much “by the book” so far as I can tell.