Case Document 8 Filed 11/15/18 Page 1 of 8

ave to ?le RANTED 
13 .J

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Amy B. backse? Date
United States District Judge

 

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA FM, (m6

No. 13-157 (363:)

 

UNITED STATES OF AMERICA,
Plaintiff,
v.
PAUL J. MANAFORT, JR.,

1












Defendant. 


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I,

PETITION OF THE FEDERAL SAVINGS BANK FOR 
The Federal Savings Bank (?the Bank?), a federal savings bank, the deposit
accounts of which are insured by the Federal Deposit Insurance Corporation (FDIC), by
and through its undersigned counsel, petitions this court for an ancillary hearing pursuant to Title
21, United States Code, Section 853(n) and asserts its interest as an innocent third party with 
respect to property which has been ordered to be forfeited to the United States in a preliminary

forfeiture order in this matter. In support of this petition, the Bank states as follows:

I. The Bank asserts its interest in the following items of property ordered to be
forfeited to the United States in this court?s October 10, 2018, preliminary order of forfeiture:

- The real property and premises commonly known as 174 Jobs Lane, Water
Mill, New York 11976, (Block 209, Lot 1104), including all appurtenances,
improvements, and attachments thereon ("the Jobs Lane collateral?).

- The real property and premises commonly known as 377 Union Street,
Brooklyn, New York 11231 (Block 429, Lot 65), including all appurtenances,
improvements, and attachments thereon (?the Union Street Property").

- All funds held in account number held at the Bank (together

 




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Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 2 of 8

with the Union Street Property, "the Union Street Collateral").
The Jobs Lane Collateral

2.

On or about November 16,2016, SummerbreezeLLC, a New York limited

liability company, Paul J. Manafort and Kathleen B. Manafort (collectively, "2016
Borrowers") executed and delivered to the Bank

a

promissory note ("the November 2016

Note") in the principal amount of $9,500,000 in connection with the Bank providing a loan

to the 2016 Borrowers. A copy of the November 2016 Note is attached hereto

as

Exhibit A.

The Bank disbursed 99,463,597.67 to the20l6 Borrowers pursuant to the terms of the
November 2016 Note. The material contractual payment terms of the $9.5 million loan are as

follows: (i) the $9.5 million loan matures contractually on December 1, 2046, the date that all
of the principal was scheduled to become due and payable; (ii) interest accrues at

a

rate equal

to 7.25o/o through December, 2019 and is payable monthly for the actual days that the loan is
scheduled to be outstanding (monthly pa¡rments through December 2019 were estimated to be

approximately $64,806.75); (iii) after December 2019, the interest rate would adjust to oneyear LIBOR plus 5.00% calculated in accordance to the terms of the loan documents; and, (iv)

in addition to the foregoing, the2016 Borrowers are required to pay insurance, taxes and
maintain the property in good repair and, if applicable, late charges and/or interest at a default
rate.

3.

The November 20l6Note was and is secured by a mortgage dated November

16,2016, recorded on December 9,2016, as instrument number DH036762, in the official
records of Suffolk County, New

York. A copy of the mortgage is attached hereto as Exhibit

B.

4.

As of September 30, 2018, the principal due and owing under the November

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 Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 3 of 8

2016 Note is $9,463,597 .67, the interest due and owing is $695,640.15, and contractual late
fees due and owing are 5473,779.88. Interest continues to accrue under the November 2016

Note at arateof $1,905.86 per diem from Octob er 1,20t78. The 2016 Borrowers have failed
to comply with the terms of the November 2016 Note and the related mortgage and other loan
documents. As

a

result, the November 2016 Note is presently in default, including as a

consequence of Borrowers failure to make pa¡rments as provided for therein. The November

2016 Note has been continuously in payment default since November I,2017.

5.

Pursuant to the terms of the mortgage (Section 5), casualty insurance

in

"amounts required by Lender" must be maintained on the property. The Bank has paid
casualty insurance premiums in the amount of $31,814.00 through October 17,2018.

The Union Street Collateral

6,

On or about January 4,2017 , Paul J. Manafort and Kathleen B. Manafort

(*2017 Borrowers") executed and delivered to the Bank two promissory notes ("the January
2017 Notes") in the principal amounts of $5,300,000 and $1,200,000, respectively, in

connection with the Bank providing loans to the Borrowers. Copies of the January 2017
Notes are attached hereto as Exhibits C and D. On or about January 4,201J,the Bank
disbursed $5,300,000 to the 2017 Borrowers pursuant to the terms of the $5.3 million note.

Additionally, through the date hereof, the Bank has disburs ed $624,305.72 to the 2017
Borrowers under the $1.2 million note. The material contractual payment terms of the $5.3

million loan are as follows: (i) the $5.3 million loan matured contractually on January 4,2018,
the date that all of the principal was scheduled to become due and payable; (ii) interest
accrues af arate equal to 7.25o/o through the date of repayment and is payable monthly starting

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 Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 4 of 8

on March 1,2017 for the actual days that the loan is scheduled to be outstanding (monthly
payrnents were estimated to be approximately $32,020.83); and,

(iii) in addition to the

foregoing, the2017 Borrowers are required to pay insurance and taxes and, if applicable, late
charges andlor interest at a default rate. The material contractual payment terms of the $1.2

million loan are as follows: (i) the $1.2 million loan, 5624,305.72 in principal of which is
outstanding, matured contractually on January 4,2018, the date that all of the principal was
scheduled to become due and payable;

(ii) interest accrues at arate equal to 1.25o/o on

amounts outstanding through the date of repa¡mrent and is payable monthly starting on March

t,2017 for the actual days that the loan is scheduled to be outstandingi

m{ (iii) in addition to

the foregoing, the 2017 Bonowers are required to pay insurance and taxes and,

if applicable,

late charges and/or interest at a default rate.

7.

The January 2017 Notes were and are secured by the following two mortgages:

(Ð $5.3 million mortgage dated as of January 17,2017,recorded on February 2,2017 as
instrument number 2017012300896002 001E7F4D, in the official records of the Office of the

City Register of the City of New York, Kings County, New York; and (ii) $1.2 million
mortgage dated as of January 17,2017 , recorded on February 2,2017 as instrument number
2017012300896004 001E7FC5, in the official records of the Office of the City Register of the

City of New York, Kings County, New York

.

Copies of those mortgages are attached

hereto as Exhibits E and F.

8.

The January 2017 Notes were and are additionally secured by approximately

$2,500,000 in funds held in account number XXXXXX0969 at the Bank, pursuant to a

Deposit Account and Security Agreement, dated January 4,2017. A copy of that
agreement is attached hereto as Exhibit G.

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 Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 5 of 8

9.

As of September 30,2018, the principal due and owing under the January 2017

Notes is $5,924,305.72, the interest due and owing is $498,997 .47 , and late fees due and

owing

are $296,215 .29 . lnterest continues

to accrue under the January 201 7 Notes at a rate

of

$1,483.56 per diem from Octobor 1,2018. The 2017 Bonowers have failed to comply with
the terms of the January 2017 Notes and the related mortgages and other loan documents. As
a

result, the January 2017 Notes are presently in default including as a consequence

of

Borrowers' failure to make payments as provided for in the January 2017 Notes. The January
2017 Notes have been continuously in such default since November 1,2017

10.

.

Pursuant to the terms of the mortgages, casualty insurance in varying amounts

must be maintained on the property. The Bank has paid casualty insurance premiums in the
amount of $72,763.90 through November 30, 2018.

Request for

11.

Relief

Pursuant to 21 U.S.C. $ 853(nX6), the Bank has a prior vested or superior

interest in the Jobs Lane Collateral and the Union Street Collateral, or is a bona fide purchaser

for value of the right, title, or interest in the above-described property and was at the time of
the loan transactions reasonably without cause to believe that the property was subject to

forfeiture. In particular, the indictments against Mr. Manafort (and the forfeiture allegations
contained therein regarding those pieces of property) were brought long after those pieces

of

property were pledged to the Bank as collateral in support of the loans.

12.

Moreover, those pieceS of collateral are forfeitable as against Mr. Manafort

pursuant to Count One of a Superseding Criminal Information filed against Mr. Manafort in

this case on September 14,2018 (Doc. 419), alleging Mr. Manafort's conspiracy, in violation

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 Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 6 of 8

of

18 U.S.C. $ 371, to commit the

18 U.S.C. $ 1956; (2) tax fraud, in

following offenses: (1) money laundering, in violation of
violation of 26 U.S.C. $ 7206(1); (3) failing to file Foreign

Bank Account Reports, in violation of 31 U.S.C. $$ 5312 and5322(b); (d) failing to register
under the Foreign Agents Registration Act, in violation of 22 U.S.C. $$ 612, 618(a)(1) and

(2); and (3) making false statements to the Department of Justice, in violation of l8 U.S.C.

$

1001(a) and22 U.S.C. $$ 612 and 618(a)(2).

13.

Mr. Manafort pleaded guilty to Count One of the Superseding Criminal

Information on the same day of its filing. (Doc. 422.) OnOctober 10,2018, the Court
entered a Consent Order of Forfeiture finding that certain pieces of property, including the
Jobs Lane Collateral and the Union Street Collateral, were forfeitable as against Mr. Manafort
based on his guilty plea to Count One of the Superseding Information.

14.

'When

it

extended the loans to Mr. Manafort, the Bank had no knowledge and

no reason to know that Mr. Manafort had acquired any of that collateral as a result of his

having engaged in any criminal activity, including a conspiracy to commit money laundering,
tax fraud, FARA violations, or obstruct justice. Nor is there any suggestion in the
Superseding Information or in Mr. Manafort's Plea Agreement and accompanying factual

stipulation ("Statement of Offense") that the Bank had any reason to know that Mr. Manafort
had engaged in that conspiracy or its underlying offenses, or that the properties were

otherwise subject to forfeiture when the Bank made its loans to Mr. Manafort and those
properties were pledged to the Bank as security for those loans. In fact, according to the
Statement of Offense, the Bank was a victim of Mr. Manafort's fraud, as he made a series

of

false and fraudulent material representations to Bank to seclre both loans.

15.

The petitioner seeks relief from this court's preliminary order of forfeiture and

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 Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 7 of 8

hereby requests that this Honorable Court hold a hearing ancillary to the criminal conviction

of Mr. Manafort at which the petitioner may present evidence and witnesses on its own behalf
pursuant to 21 U.S.C. $ 853(n)(5) and further that this court amend its preliminary order

of

forfeiture dated October 10, 2018, to recognize fully the interest of the Bank as it is set forth
herein.

Dated: November 9,2018

Respectfully submitted,
THE FEDERAL SAVINGS BANK

B
Jason T.

(pro hac vice admíssion pending)
Mitchell (D.C. B,ar # 1005757)

SCHULTE ROTH &, ZABEL LLP
919 Third Avenue
New York, New York 10022
(212) 1s6-2000
Attorney

þr

7

Petítioner

 Case 1:18-mc-00167-ABJ Document 8 Filed 11/15/18 Page 8 of 8

DECL.{RÄITION
I declare under penalty of perjury that the
foregoing is true and co.nect,
Executed on this

5* ouy of November, 201g, at chicago, Ilrinois.

Javier
The F

.s

President
Savings Bank