One of the more interesting revelations to come out of the recent indictments by Special Counsel Robert Mueller is that Paul Manafort managed to spend over $1,000,000 on antique rugs at shops in Alexandria, Virginia, including $250,000 on a single day. The rug-binge was not included in the indictment just for gossip. Rather, it was cited as evidence of money laundering. The prosecution claim is that Manafort (and Richard Gates) caused over $12,000,000 in wire transfers to be made “for goods, services, and real estate,” but did not report the transfers as income and therefore did not pay any taxes.
Aaron Mak dug into the story for Slate, but he was unable to positively locate the pseudonymous “Vendor C” from whom Manafort allegedly purchased the carpets. Igor Bobic reported the same story at the Huffington Post with the same result.
Neither Mak nor Bobic, however, appear to be old enough to remember the other time an expensive rug was offered as evidence in a federal prosecution related to foreign influence. That happened in the 1949 perjury trial of Alger Hiss, in which he was accused of lying about his membership in the Communist Party. The key witness Whitaker Chambers testified that Hiss's Russian handlers had given him an expensive “Bokhara carpet” as appreciation for his good work. And sure enough, such a carpet was found in Hiss's home.
Hiss had an explanation for the carpet, but there was plenty of other evidence against him, including his typewriter and the Pumpkin Papers. Hiss’s rug cost $276.71, which was a lot of money when it was purchased in the 1930s, but not close to a million bucks in today’s money (about $5000.00, adjusted for inflation).
After an initial mistrial, Hiss was found guilty the second time around and sentenced to five years in prison.
We will have to wait and see what happens with Manafort.
(I am not actually old enough to remember the Hiss trials, as I was only three months old when they began. But I well remember the controversy, which extended well into the 1980s.)
Should've called Lincoln Carpeting at NA2-9000.
The "controversy" over Hiss's guilt (which involved a perjury trial and not espionage because the statute of limitations had expired) consisted of faculty on the far left writing passionate articles in places like The Nation. The more mainstream left was willing to entertain the possibility of innocence, more or less on the grounds that you couldn't trust J. Edgar Hoover until one such liberal, Smith College historian Allen Weinstein wrote a book on the case. As he researched the case, it became obvious to him that Hiss was in fact a Communist spy. Weinstein received lots of vitriol from Hiss's advocates until the Venona papers were released and showed beyond any doubt that both Hiss and the Rosenbergs were guilty of what they were charged with.
Weinstein's book is linked in the original post.
Let's remember that it isn't money laundering unless the underlying action was illegal. If they money was given as 'consulting' to gain access to certain politicians, then it is not illegal, in fact that is what Carlyle and a lot of funds do as well. So unless there is an underlying act that merits illegality, I am not impressed. This looks like a lot of fluff to me, a few technical violations for failure to report. Furthermore, money laundering is done by 'layering' of assets, such as transferring cash to credit cards or life insurance, then back out again into bank accounts, so unless the carpets were bought and sold quickly, the case is hard to make. I am no fan of Trump, but there are other reasons to be upset with him.
Litowitz,
If I fail to report the three bill fee I received from a retail theft client, it is tax evasion and punishable by a term of incarceration. Hardly a technicality. Manifort failed to report income.In any event, the evidence is not that he purchased the rugs to launder the money, but as a bauble for his lifestyle. It's called a lifestyle audit. His reported ordinary income did not support his lifestyle.
Although I've watched both Breaking Bad and Ozark, I still don't think I understand what money laundering is. Why would one launder money if not to hide illegal activity? Based on what Steve wrote above, it sounds like the serious allegation is not money laundering but tax evasion. I don't think this has much to do with Trump, but I also don't know why hiding $12 million of income from tax authorities (if that is the allegation), amounts to little more than "a few technical violations."
It would be money laundering if they were moving funds into the U.S. by avoiding the banking system and thus without creating a record of the financial transactions.
Jeremy,
$12 million of income is so small that you cannot even measure it on any scale of tax avoidance. Do you have any concept of the actual numbers of real money laundering? HSBC laundered $880 million in drug money from just 2 clients – Mexican drug cartels – and billions more besides, and paid out mover a billion in penalties. Same for many large banks. The US DOJ estimates that they catch 1% of the laundered money passing through the US through correspondent banking – and that is pure drug and human trafficking money. So that's why I don't get so freaked out about a few million here and there that was not reported as ordinary income. Have you read the Panama Papers? That is 200,000 shell companies set up to avoid taxes. And it implicates most politicians and wealthy businessmen. So again, I am not freaking out about these numbers. As you know, I am no fan of Trump, but this cuts both ways – Democratic and Republican.
I mean, tell me how different this is:
https://www.nytimes.com/2015/04/24/us/cash-flowed-to-clinton-foundation-as-russians-pressed-for-control-of-uranium-company.html
Thanks, Litowitz, that is helpful. I don't entirely follow your logic. $12 million from a private party does seem significant to me, even if financial institutions money launder in much larger numbers. Should the DoJ let a relatively small fish off the hook because it cannot land a behemoth? As to the Clinton story, I think it looks much more significant than the Manafort allegations. But there again, can Mueller ignore the crime that he believes he has uncovered b/c alleged crimes outside of his purview go unpunished?
Litowitz,
Your logic sounds like my three bill retail theft and traffic offender clients. They make the same arguments. Why are the coppers pinching bullshit when the corporations are stealing millions? Or, everybody else was speeding faster than me. Or, why aren't the police catching terrorists? Your reasoning suggest that somehow because there are bigger fish, the little ones should get away with criminality. Interesting justice system you have there.