The Story Behind Bannon's Arrest
On August 20th, President Trump’s former Chief Strategist Steve Bannon was arrested on fraud charges relating to the “We Build the Wall” construction project on the U.S.-Mexico border.
The news made for splashy headlines, but story behind the charges was more mundane. Brian Kolfage, a triple amputee veteran and Purple Heart recipient, used a crowdfunding website as part of a political gag aimed at raising $1 billion dollars to construct a U.S.-Mexico border wall. After unexpectedly raising $17 million dollars within the first week, Kolfage decided to hand off the suddenly real and ambitious initiative to someone with more experience, connections, and resources. Steve Bannon stepped up to help the fledgling project navigate the labyrinth of red tape and regulations designed to stop the project.
The crowdfunding website relinquished the funds to a nonprofit set up by Bannon as Kolfage continued to promote the project, raising additional funds while promising to spend 100% of funds on the wall’s construction and not to pay a salary to the organizers. Indeed, the bylaws of the new 501(c)(4) “We Build the Wall” nonprofit reflect these statements. Under Bannon, “We Build the Wall” began paying various construction, marketing, and legal vendors for work relating to the project. One of these vendors owned by Bannon associate Timothy Shea began paying Kolfage for marketing work on the project. Kolfage could not get paid as an organizer but could as an employee of a vendor, receiving a total of $350,000 since 2018 for his work on the project.
Prosecutors from the Southern District of New York disagreed, conducting a pre-dawn raid to arrest yet another Trump ally (though this time, without the CNN camera crew). Bannon was yanked off a yacht belonging to a wealthy Chinese dissident and charged along with Kolfage, Shea, and another associate.
The sealed indictment against Brian Kolfage, Stephen Bannon, et al. centers around the various attempts to keep the payments to Kolfage a secret for public relations reasons, listing the various pathways and obfuscation maneuvers allegedly used by Bannon and associates to hide the fact that Kolfage was paid by affiliate organizations. Although the maneuvers themselves were legal, two fraud charges were filed on the premise that the payments made to Kolfage by various legal, construction, and marketing vendors broke the promise that organizers would be unpaid. The indictment also mentions the reimbursements that Bannon and codefendants received for travel and miscellaneous expenses, though does not mention their amount.
Whether or not nonprofits can use vendors which employ the nonprofit’s organizers is a contextual question, likely answered in the bylaws of each 501(c)(4) nonprofit. Bannon and his associates are not charged with violating the bylaws of their nonprofit, any laws governing 501(c)(4) organizations, or with making false statements on tax forms or other financial paperwork. If the nonprofit’s bylaws were never violated, the basis of the charges become unclear. Charities almost always take a haircut for operating expenditures, the haircut in this case amounting to less than 2%, far less than the typical 40% incurred by American charities.
Fraud charges require the existence of at least one donor who contributed on the basis that there would be no administrative haircut and would not have contributed otherwise, but the indictment issued by the United States District Court for the Southern District of New York (SDNY) fails to mention such a victim. In fact, no specific victims in the case are listed in the indictment, a mainstay of conventional fraud charges, raising questions of jurisdictional venue regarding the SDNY’s right to bring charges in the first place. There have been no allegations of donors complaining that Kolfage received pay, a fact publicly disclosed since January 2020 (even the indictment mentions this), and various offers to refund unhappy donors have been made since the project’s conception.
The issue of Kolfage’s salary aside, why the SDNY would allege that Bannon and his two wealthy associates ran a two-year scam to expense some hotel bills makes more sense than you think. The charges were filed by acting United States Attorney Audrey Strauss, a registered Democrat filling the shoes of her former boss Geoffrey Berman after he was fired from the position by President Trump. Berman was terminated after it came out that he had been using his position as a federal prosecutor to wage war against Trump’s attorney Rudy Giuliani in retaliation for Giuliani’s investigation into Joe and Hunter Biden’s Burisma scandal. Under the pretext of investigating a foreign lobbying disclosure violation, Berman had attempted to pressure Giuliani out of investigating how Joe Biden forced the Ukranian government to fire a prosecutor who was investigating his son. After initially refusing to vacate his post, Berman left the SDNY to his deputy Audrey Strauss.
Audrey Strauss ‘s case history reads like a partisan hitman. Under Berman, Strauss worked on cases against Michael Cohen, Rudy Giuliani, and Republican House Representative Chris Collins. Not long after her boss was pushed out, she rolled out the charges against Steve Bannon, making any future firing look like obstruction of justice. Strauss’s maneuver should sound familiar to anyone who remembers former FBI Director James Comey’s termination. Immediately after Comey was fired, FBI Deputy Director Andrew McCabe became acting FBI Director and immediately launched a retaliatory investigation into Trump to protect his position.
Using the McCabe maneuver, Strauss has caught President Trump in a double bind. If the Department of Justice is contemplating firing Audrey Strauss for conducting deeply political investigations under Geoffrey Berman, they’d better think twice. Although the charges against Bannon affirm her politicization of prosecutorial power, firing her now would look like obstruction of justice. If they leave her alone, she will likely find excuses to charge additional Trump associates, throwing red meat to her party in the final months of an important election year and distracting the public from important indictments relating to the illegally conceived anti-Trump FISA spy warrants.
In pursuing this case, Strauss will gain access to the list of donors who contributed to “We Build the Wall”, opening the door to political persecution of noteworthy individuals on the list and causing a chilling effect on grassroots political activism. Strauss’s indictment also includes a forfeiture request regarding the remaining “We Build the Wall” funds, which the court will claim an estimated 10% administrative handling fee even if an acquittal occurs later down the road and ending the project in the meantime.
It may be awhile before the political headwinds shaping the charges against Steve Bannon are recognized by the media, but if the unravelling of the Russian investigation serves as any indicator, the answer is most likely never. Even General Flynn, despite the uncovering of exonerating evidence, material misstatements by prosecutors, and an illegal frame-up plot originating in Obama’s Oval Office, has yet to get a fair shake in the media or the courts. Unlike Flynn, “Sloppy Steve” is not widely loved by the Trump fans he is charged with defrauding, and the prosecutors are taking advantage.