Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 1 of 27 PageID# 6856 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA ALEXANDRIA DIVISION UNITED STATES OF AMERICA v. Crim. No. 1:18-cr-83 (TSE) PAUL J. MANAFORT, JR., Defendant. THE GOVERNMENT’S SENTENCING MEMORANDUM The United States of America, by and through Special Counsel Robert S. Mueller, III, files this submission to address the sentencing of defendant Paul J. Manafort, Jr. As an initial matter, the government agrees with the guidelines analysis in the Presentence Investigation Report (PSR) and its calculation of the defendant’s Total Offense Level as 38 with a corresponding range of imprisonment of 235 to 293 months, a fine range of $50,000 to $24,371,497.74, a term of supervised release of up to five years, restitution in the amount of $24,815,108.74, and forfeiture in the amount of $4,412,500. Second, while the government does not take a position as to the specific sentence to be imposed here, the government sets forth below its assessment of the nature of the offenses and the characteristics of the defendant under Title 18, United States Code, Section 3553(a). The defendant stands convicted of the serious crimes of tax fraud, bank fraud, and failing to file a foreign bank account report. Manafort was the lead perpetrator and a direct beneficiary of each offense. And while some of these offenses are commonly prosecuted, there was nothing ordinary about the millions of dollars involved in the defendant’s crimes, the duration of his Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 2 of 27 PageID# 6857 criminal conduct, or the sophistication of his schemes.1 Together with the relevant criminal conduct, Manafort’s misconduct involved more than $16 million in unreported income resulting in more than $6 million in federal taxes owed, more than $55 million hidden in foreign bank accounts, and more than $25 million secured from financial institutions through lies resulting in a fraud loss of more than $6 million. Manafort committed these crimes over an extended period of time, from at least 2010 to 2016. His criminal decisions were not momentary or limited in time; they were routine. And Manafort’s repeated misrepresentations to financial institutions were brazen, at least some of which were made at a time when he was the subject of significant national attention. Neither the Probation Department nor the government is aware of any mitigating factors. Manafort did not commit these crimes out of necessity or hardship. He was well educated, professionally successful, and financially well off. He nonetheless cheated the United States Treasury and the public out of more than $6 million in taxes at a time when he had substantial resources. Manafort committed bank fraud to supplement his liquidity because his lavish spending exhausted his substantial cash resources when his overseas income dwindled. Finally, Manafort pled guilty in September 2018 in the United States District Court for the District of Columbia to others crimes committed over an even longer period. The government references those crimes below principally as they pertain to the Section 3553(a) factors and, in particular, because they demonstrate the defendant’s concerted criminality, including the conduct to which he pled guilty, from as early as 2005 and continuing up until the 1 Manafort was being investigated prior to the May 2017 appointment of the Special Counsel by prosecutors in this district and the Criminal Division of the Department of Justice. See Motion Hearing Tr., May 4, 2018, at 4. 2 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 3 of 27 PageID# 6858 defendant’s involvement in an obstruction of justice conspiracy between February 23, 2018 and April 2018—a crime Manafort committed while under indictment in two jurisdictions and subject to court-ordered bail conditions in each. The District of Columbia offenses are also relevant to the application of § 2S1.3(b)(2) of the Sentencing Guidelines to the FBAR offenses and to the issue of acceptance of responsibility, as discussed below. In the end, Manafort acted for more than a decade as if he were above the law, and deprived the federal government and various financial institutions of millions of dollars. The sentence here should reflect the seriousness of these crimes, and serve to both deter Manafort and others from engaging in such conduct. I. Procedural History On February 22, 2018, a grand jury sitting in the Eastern District of Virginia returned a 32-count Superseding Indictment charging Manafort and co-defendant Richard Gates with a series of crimes involving tax fraud, failure to file foreign bank account reports, and bank fraud. Superseding Indictment, Feb. 2, 2019, Doc. 9. The defendant proceeded to trial on July 31, 2018 and, on August 21, the jury convicted the defendant on eight counts: Counts 1 through 5 (filing false income tax returns for the years 2010 to 2014); Count 12 (failing to file a report of foreign bank and financial accounts (FBAR) in 2012), and Counts 25 and 27 (bank fraud relating to a Citizens Bank loan for the Howard Street property in New York, and a Banc of California commercial loan, respectively). The jury did not reach a verdict on the remaining ten counts.2 2 The Jury Verdict Form indicated that the jury voted eleven to one in favor of guilt on all ten counts for which it did not reach a verdict. See Jury Verdict Form, Aug. 21, 2018, Doc. 280. 3 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 4 of 27 PageID# 6859 II. Trial Evidence Given the Court’s familiarity with the trial evidence, the government only briefly outlines it below. A. Tax Charges Manafort’s tax returns were false as to the stated income and the fact that in each year Manafort failed to report the existence of his overseas bank accounts. The government proved Manafort’s unreported income through a series of payments from his overseas accounts to vendors for various goods and services and for the purchase and improvement of real estate in New York and Virginia.3 FBI Forensic Accountant Morgan Magionos traced each wire transfer, detailing the banks and accounts over the period from 2010 to 2014, and calculated the total 3 The evidence supporting the false returns included both testimony and documentary evidence. Eight vendors testified about receiving payments from overseas accounts for goods, services, or real estate purchased by the defendant in the United States. See Trial Tr. at 285-312 (Testimony of Maximillian Katzman from Alan Couture); id. at 312-29 (Testimony of Ronald Wall from House of Bijan); id. at 33949 (Testimony of Daniel Opsut from American Service Center/Mercedes-Benz of Alexandria); id. at 34959 (Testimony of Wayne Holland from McEnearney Associates); id. at 361-91 (Testimony of Stephen Jacobson from SP&C Home Improvement); id. at 393-410 (Testimony of Doug DeLuca from Federal Stone and Brick); id. at 435-461 (Testimony of Joel Maxwell from Big Picture Solutions); id. at 469-91 (Testimony of Michael Regolizio from New Leaf Landscape). This testimony was corroborated by invoices, banks statements, emails, and other documentary evidence. See, e.g., Government Exhibit 94A (SP&C Home Improvement Invoices 2010-2014); Government Exhibit 95A (SP&C Home Improvement Bank Records); Government Exhibit 97A (Alan Couture Invoices 2010-2014); Government Exhibit 98 (Alan Couture Bank Records); Government Exhibit 99 (March 21, 2011 Email from Manafort to M. Katzman). Evidence with respect to six additional vendors and three real estate purchases, and supporting documentation, was admitted by stipulation. See e.g., Government Exhibit 327 (Stipulation Regarding Aegis Holdings, LLC); Government Exhibit 329 (Stipulation Regarding J&J Oriental Rug Gallery); Government Exhibit 332 (Stipulation Regarding Don Beyer Motors, Inc.); Government Exhibit 334 (Stipulation Regarding Sabatello Construction of Florida, Inc.); Government Exhibit 335 (Stipulation Regarding Scott L. Wilson Landscaping & Tree Specialists, Inc.); Government Exhibit 336 (Stipulation Regarding Sensoryphile, Inc.); Government Exhibit 328 (Stipulation Relating to the Purchase of 377 Union Street, Brooklyn, New York); Government Exhibit 330 (Stipulation Relating to the Purchase of 29 Howard Street #4, New York, New York); Government Exhibit 331 (Stipulation Relating to the Purchase of 1046 N. Edgewood Street, Arlington, Virginia). 4 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 5 of 27 PageID# 6860 amount to be $15,571,046, as reflected on Government Exhibit 72 (attached as Exhibit A).4 Additionally, the government proved that Manafort further misrepresented his income by falsely characterizing certain income as loans.5 IRS Revenue Agent Michael Welch testified that Manafort failed to report more than $16 million in income on line 22 of his tax returns during tax years 2010 through 2014, as documented in Government Exhibit 77 (attached as Exhibit B).6 Welch also testified that Manafort failed to identify any of his foreign bank accounts on Schedule B, Line 7A for the years from 2010 to 2014.7 The IRS has determined that Manafort owed $6,164,032 in taxes for his unreported income. See PSR, ¶ 36. B. FBAR Charges Manafort was found guilty of the Count 12 FBAR charge relating to 2012. Under the Sentencing Guidelines the FBAR charges in Counts 11, 13 and 14, for the years 2011, 2013, and 2014, respectively, constitute relevant conduct. See PSR, ¶ 75. FBI Forensic Accountant Magionos, using a series of charts, testified that Manafort maintained 31 overseas accounts in three countries and listed the aggregate maximum value in those accounts in each year from 2011 to 2014 as reflected on the following exhibits:8  Government Exhibit 73B documented the aggregate maximum value of foreign bank accounts controlled by Manafort in 2011 that totaled approximately $8.3 million; 4 See Trial Tr. at 1617-20 (Testimony of Morgan Magionos). See Trial Tr. at 903-06 (Cindy LaPorta testified that Gates proposed changing the amount of Manafort’s alleged loans to reduce his total taxable income); see id. at 1107-09 (Gates testified that at Manafort’s direction he instructed Manafort’s bookkeeper and tax preparers to treat certain income as loans to avoid paying taxes on the income). 5 6 See Trial Tr. at 1679-82 (Testimony of Michael Welch). 7 Id. at 1695-97. 8 See Trial Tr. at 1620-24 (Testimony of Morgan Magionos). 5 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 6 of 27 PageID# 6861  Government Exhibit 73C documented the aggregate maximum value of foreign bank accounts controlled by Manafort in 2012 that totaled approximately $25.7 million;  Government Exhibit 73D documented the aggregate maximum value of foreign bank accounts controlled by Manafort in 2013 that totaled approximately $18.7 million;  Government Exhibit 73E documented the aggregate maximum value of foreign bank accounts in 2014 that totaled approximately $2.7 million.9 Copies of Government Exhibits 73B, 73C, 73D and 73E are attached as Exhibit C. C. Bank Frauds The jury convicted Manafort of the two bank fraud schemes charged in Counts 25 and 27. Manafort sought both loans at a time when he was no longer receiving income from Ukraine. Count 25 charged Manafort with defrauding Citizens Bank of $3.4 million relating to a loan for property on Howard Street in New York, New York. As part of that fraud, the government proved at trial that the defendant made, or caused to be made, the following three material false statements between December 2015 and March 2016: (1) that the Howard Street residence was his second home; (2) that a $1.5 million dollar loan from a Cyprus entity named Peranova had been forgiven in the prior year; and (3) that there was no mortgage on Manafort’s Union Street property in Brooklyn, New York.10 Two bank witnesses, Manafort’s tax preparer and bookkeeper, and Rick Gates testified to the details of the charged scheme. Their testimony 9 Special Agent Paula Liss from the Financial Crimes Enforcement Network testified that no FBAR reports were filed by Manafort or his related entities in the relevant time period. See Trial Tr. at 1080-81; 2293-94. 10 See Trial Tr. at 2409 (government summation identifying false statements relating to the Counts 24 and 25 Citizens Bank fraud/conspiracy charges involving the Howard Street property). 6 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 7 of 27 PageID# 6862 was corroborated by a series of emails, tax returns, and insurance documents, among other documentary evidence.11 Manafort was also convicted, in Count 27, of defrauding the Banc of California with respect to a $1 million dollar commercial loan. The government proved at trial that the defendant made, or caused to be made, the following material false statements: (1) omitting to report his Howard Street mortgage on his loan application; and (2) submitting a materially false 2015 DMP Profit and Loss Statement.12 Among other evidence, Washkuhn and Gates testified about the false DMP Profit and Loss Statements submitted to the bank, with Gates explaining the various emails in which Manafort directed him to manipulate the relevant financial statement.13 11 Melinda James (née Francis) from Citizens Bank testified that Manafort represented the Howard Street property to be a second home and that Manafort represented that there was no mortgage on the Union Street property. See Trial Tr. at 1747, 1755. Tax preparer Cindy LaPorta testified about her representations relating to the Peranova loan to Citizens Bank, nothwithstanding the fact that she had concerns it was never a loan at all, see Trial Tr. at 944-59, as did Gates, who also noted that money from Peranova was income and was never a loan, see Trial Tr. at 1297-1308. Bookkeeper Heather Washkuhn testified that at the time of the Howard Street loan, there was a mortgage on the Union Street property. See Trial Tr. at 596-601. The supporting documentary evidence included the following: Government Exhibit 227 (Manafort’s bank application identifying the Howard Street property as a second residence); Government Exhibit 337L (2015 MC Soho Tax Return reporting $115,987 in rental income for Howard Street apartment); Government Exhibit 337M (2016 MC Soho Tax Return reporting $108,000 in rental income for Howard Street apartment); Government Exhibit 127 (February 5, 2015 email relating to rental income from the Howard Street apartment); Government Exhibit 503 (March 12, 2016 email relating to rental earnings generated from the Howard Street property); Government Exhibit 422 (January 26, 2016 email from Manafort to his son-in-law reminding him that the appraiser is coming to the Howard Street apartment, who believes that the son-in-law and his wife live in the apartment); Government Exhibit 118 (Airbnb records relating to the rental of the Howard Street apartment); Government Exhibit 500 (Stipulation regarding Genesis Capital mortgage on Union Street Property). 12 See Trial Tr. at 2418-21 (government summation identifying false statements relating to the Counts 26 and 27 Banc of California commercial loan fraud/conspiracy). Gates testified that at Manafort’s direction he altered the 2015 DMP Profit and Loss Statement that was ultimately sent to the Banc of California. See Trial Tr. at 1317-26. Washkuhn testified to the falsity of the submitted 2015 DMP Profit and Loss Statement. See Trial Tr. at 601-19. The supporting documentary evidence included among other evidence: Government Exhibit 140 (March 16, 2016 emails between Gates and Washkuhn involving the 2015 DMP Profit and Loss Statement); Government Exhibit 392 (March 16, 2016 email between Manafort and Gates involving the 2015 DMP Profit and Loss Statement); and Government Exhibit 298 (March 16, 2016 email from Manafort to Perris Kaufman 13 7 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 8 of 27 PageID# 6863 With respect to the three other bank frauds for which the jury failed to reach a verdict, one involving a $5.5 million loan from Citizens Bank (charged only as a conspiracy) and two involving loans from The Federal Savings Bank, one for $9.5 million and the other for $6.5 million, respectively, the defendant admitted to his involvement in each of these bank frauds as part of his guilty plea in the District of Columbia.14 The evidence at trial established those same facts through witness testimony and documentary evidence.15 With respect to the Union Street loan conspiracy involving Citizens Bank, charged in Count 28, Manafort pledged his property at 377 Union Street in Brooklyn, New York. At the attaching false 2015 DMP Profit and Loss Statement). Gary Seferian, Senior Vice President of the Managed Assets Group at the Banc of California, testified about the loan process and the materiality of Manafort’s false statements. See Trial Tr. at 1958-88. Plea Agreement, United States v. Manafort, 1:17-cr-201 (ABJ) (D.D.C. Sept.14, 2018), Doc 422 (“D.C. Plea Agreement”); Statement of the Offenses and Other Acts, United States v. Manafort, 1:17-cr-201 (ABJ) (D.D.C. Sept.14, 2018), Doc 423 (“D.C. Statement of the Offense”) (collectively attached as Exhibit D). 14 15 With respect to the Citizens Bank Union Street loan, Manafort made, or caused to be made, the following misrepresentations: (a) he caused to be submitted a false 2016 DMP Profit and Loss Statement; and (b) he falsely claimed the Peranova loan was forgiven and made false statements about his income. See Trial Tr. at 2418-21 (government summation identifying false statements relating to Counts 28 Citizens Bank Union Street loan conspiracy). Taryn Rodriguez from Citizens Bank testified about the loans process, see Trial Tr. at 1906-37, LaPorta testified about the Peranova loan issues, see id., at 94759, as did Gates, see id. at 1326-30, and Washkuhn testified about the false DMP Profit and Loss Statement comparing it to the original she prepared, see id. at 631-32. With respect to The Federal Savings Bank loans, Manafort made, or caused to be made, the following misrepresentations as to both loans: (a) he caused to be submitted a false 2015 DMP Profit and Loss Statement; (b) he caused to be submitted a false 2016 DMP Profit and Loss Statement; (c) he falsely claimed that the $300,000 delinquency on his American Express Card resulted from lending that credit card to Rick Gates to buy New York Yankees tickets; and (d) he made false statements about his mortgage on the Howard Street property. See Trial Tr. at 2423-24 (government summation identifying false statements relating to the Counts 29, 30, 31 and 32 bank fraud/conspiracies relating to two loans from The Federal Savings Bank). Three bank witnesses testified about The Federal Savings Bank Loans: Dennis Raico, see Trial Tr. at 2008-77; James Brennan, id. at 2164-2199; and Andrew Chojnowski, see id. at 2129-43. Among other testimony, Washkuhn identified the various submitted DMP Profit and Loss Statements as false. See Trial Tr. at 620-32. Gates testified that he never sought to borrow Manafort’s American Express card and that he did not incur the $300,000 delinquency for Yankees tickets, but rather that those tickets were for Manafort. See Trial Tr. at 1352-54. 8 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 9 of 27 PageID# 6864 time of his application, the Union Street property was encumbered by a $5.3 million dollar loan from Genesis Capital. Manafort failed to disclose this mortgage to Citizens Bank at the time of the Count 28 conspiracy, nor previously as part of the $3.4 million Citizens Howard Street loan application (charged in Counts 24 and 25). Taryn Rodriguez from Citizens Bank testified to this fact, noting that she later found the loan on her own.16 At trial, Manafort never disputed the existence of the Genesis Capital loan and in fact agreed to the underlying details in Government Exhibit 500, a stipulation between the parties relating to the Genesis Capital loan on Union Street property. III. Standards Governing Sentencing The Fourth Circuit has held that a sentencing court must: “(1) properly calculate the [Sentencing] Guidelines range; (2) allow the parties to argue for the sentence they deem appropriate and determine whether the § 3553(a) factors support the sentence[s] requested by the parties; and (3) explain its reasons for selecting a sentence.” United States v. Simmons, 269 Fed. Appx. 272, 273 (4th Cir. 2008) (citing United States v. Pauley, 511 F.3d 468, 473 (4th Cir. 2007)). Although the Sentencing Guidelines are advisory, United States v. Booker, 543 U.S. 220, 246 (2005), “district courts must begin their analysis with the Guidelines and remain cognizant of them throughout the sentencing process.” Gall v. United States, 552 U.S. 38, 50 n. 6 (2007); see Rosales-Mireles v. United States, 138 S. Ct. 1897, 1904 (2018) (“[E]ven in an advisory capacity the Guidelines serve as ‘a meaningful benchmark’ in the initial determination of a sentence and ‘through the process of appellate review.’”) (citation omitted). 16 See Trial Tr. at 1911-1917. 9 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 10 of 27 PageID# 6865 IV. The Advisory Guidelines Range The government agrees with the Probation Department’s guidelines calculations in the PSR and addresses that analysis below together with the defendant’s challenges. See Defense Objections to the PSR (dated January 21, 2019). A. Tax and FBAR Guidelines (Group 1) 1. Section 2S1.3 is the Relevant Guideline Provision As noted in the PSR, the base offense level for the Group 1 tax and FBAR counts is level 6, pursuant to § 2S1.3(b)(2), with 22 levels added based on the value of the funds held—here, more than $55 million, pursuant to § 2B1.1(b)(1)(L). See PSR ¶¶ 73-74.17 The defendant argues that the tax guidelines, and not § 2S1.3, is the appropriate starting point for the Group 1 FBAR and tax offenses, citing United States v. Kim, 1:17-cr-00248 (TSE/LMB) (E.D. Va. 2018). See Defense Objections to the PSR, at 1-2. As detailed in the PSR Addendum, the defendant’s arguments lack merit. See PSR Addendum, 52-53. First, the Guidelines explicitly distinguish between the various reporting crimes at issue here (covered by § 2S1.3) and tax offenses (covered by Part T). For example, the commentary to § 2S1.3, under the title “Statutory Provisions,” explicitly lists 31 U.S.C. § 5313—the statute of which Manafort was convicted in Count 12. Further, § 2S1.3(c)(1) addresses a reporting violation committed for the purposes of evading taxes, and specifically calls for use of the tax guidelines only if the resulting offense level is greater than the one determined under § 2S1.3.18 17 The base offense level is 6 pursuant to § 2S1.3(b)(2) because the offense at issue is not enumerated in § 2S1.3(b)(1). Section 2S1.3(c)(1), entitled “Cross Reference,” reading as follows: “If the offense was committed for the purposes of violating the Internal Revenue laws, apply the most appropriate guideline from Chapter 18 10 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 11 of 27 PageID# 6866 That criterion is not satisfied here: “the resulting offense level” under Chapter 2T of the guidelines is less than the Chapter 2S calculation. See United States v. Hill, 171 Fed. Appx. 815, 821-22 (11th Cir. 2006) (“§ 2S1.3(c)(1) was not applicable because the offense level of 16 that would have resulted from the court’s application of U.S.S.G. § 2T1.1(a)(1), would have been less than 17—the offense level that resulted from the court’s application of § 2S1.3(a) & (b)(1)”) (footnote omitted). Moreover, Manafort’s FBAR offense was not committed solely for allowing him to violate the tax laws. Rather, his use of and access to unreported overseas accounts also facilitated the money laundering and unregistered-foreign-agent (FARA) schemes to which he pled guilty in Count One of a superseding information in the District of Columbia.19 Accordingly, the tax guidelines are not appropriate here, both because the tax guidelines are not higher, as required by § 2S1.3(c)(1), and because the gravamen of the crime here was not solely tax avoidance. As part of his plea in the District of Columbia, Manafort pleaded guilty to a conspiracy to transfer funds from outside the United States to the United States with the intent to promote the felony FARA violations.20 Manafort’s scheme involved more than $6.5 million dollars in transfers from the very overseas accounts that Manafort failed to report on his tax returns and under the FBAR process.21 Two, Part T (Offenses Involving Taxation) if the resulting offense level is greater than that determined above.” 19 See D.C. Plea Agreement; D.C. Statement of the Offense ¶ 36-37. 20 Id. 21 Notably, in his objections to the PSR, the defendant falsely characterized his guilty plea in the District of Columbia as involving only a “general conspiracy to violate the Foreign Agents Registration Act,” 11 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 12 of 27 PageID# 6867 Finally, Manafort argues that the Part T guidelines are appropriate because they were used in older cases, such as United States v. Kim, supra, and thus should continue to be used to avoid unwarranted sentencing disparities for similar defendants. The government disagrees for two reasons. First, in late 2017, the Department of Justice’s Tax Division clarified its interpretation as to the appropriate guidelines applicable to FBAR violations, and its current position is consistent with that of the Probation Office in this matter; and second, the facts at issue here differ from those of the Kim prosecution. The Tax Division changed its position on the appropriate guideline provision in FBAR cases sometime in late 2017. Manafort was aware of the government’s position prior to this trial, at the very least because the Special Counsel’s Office made clear its view that the relevant guideline is § 2S1.3. Further, in Kim itself, the Tax Division and Probation Office took the position that the appropriate guideline was § 2S1.3. See Kim Plea Agreement, at 3-4 (attached as Government Exhibit E) (“The Government contends that the applicable Guideline in this matter should be U.S.S.G § 2S1.3(a)(2), § 2B1.1 and § 2S1.3(b)(2) because the defendant filed two false FBARs and a false U.S. Individual Income Tax Return, Form 1020, within a 12-month period. However, at the time that the defendant agreed to plead guilty, the Government consistently took the position with similarly situated defendants that the applicable Guideline was U.S.S.G. § 2T1.1 and § 2T1.4 due to the cross reference in § 2S1.3(c)(1). Therefore, in order to ensure that the defendant receives equitable treatment, and in accordance with Federal Rule of Criminal Procedure 11(c)(1)(B), the United States and the defendant will recommend to Def. Obj. to PSR, at 3, without any mention to the fact that his plea also included a money laundering conspiracy, among other offenses. See D.C. Plea Agreement; D.C. Statement of the Offense ¶ 36-37. 12 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 13 of 27 PageID# 6868 the Court that the following provisions of the Sentencing Guidelines apply: [the Tax Guidelines].”); Government Sentencing Brief, at 6 (attached as Government Exhibit F) (“The defendant pled guilty to the willful failure to file an FBAR, in violation of 31 U.S.C. Sections 5314 and 5322. The offense of conviction in this case falls under U.S.S.G. § 2S1.3. The Probation Office calculated the Guidelines range under U.S.S.G. § 2S1.3(a)(2)”). Further, as noted, the circumstances of the Kim and Manafort prosecutions and the conduct at issue are easily distinguished. In Kim, the defendant entered into a negotiated plea agreement which involved his cooperation, and the plea was entered into pursuant to Rule 11(c)(1)(B). Manafort’s FBAR offenses, in contrast, served to facilitate his tax offenses and his FARA and money laundering offenses. Further, the Kim prosecution was part of a series of prosecutions involving the use of overseas accounts to hide tax offenses, and thus the concern over parity with similarly situated defendants prosecuted at the same time was at its height. Calculating Manafort’s advisory Guidelines range under § 2S1.3 for an FBAR offense, even if he is one of the first defendants to be sentenced in that manner, would not constitute disparate treatment because his conduct, and the circumstances at issue, were different than in Kim. 2. A Role Enhancement is Appropriate The PSR concluded that Manafort should receive a four-level role enhancement for the Group 1 offenses, pursuant § 3B1.1(a), on the basis that “the defendant was an organizer or leader of a criminal activity that was otherwise extensive.” PSR, ¶ 78. The relevant test is the number of persons involved in the offenses, whether they were witting or unwitting. See United States v. Harvey, 532 F.3d 326, 338 (4th Cir. 2008) (“The Application Note to U.S.S.G. § 3B1.1 explains that, in determining if a criminal activity is ‘otherwise extensive,’ all persons involved 13 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 14 of 27 PageID# 6869 during the course of the entire offense are to be considered, including outsiders who provided unwitting services and thus do not qualify as ‘participants.’”); United States v. Ellis, 951 F.2d 580, 585 (4th Cir. 1991) (role enhancement based on “otherwise extensive” prong based on “‘all persons involved during the course of the entire offense,’ even the ‘unknowing services of many outsiders’”). Manafort’s criminal conduct meets this standard. Manafort controlled the money at issue, he recruited others to facilitate these crimes, and he claimed a larger share of the proceeds. Further, Manafort was plainly the leader. He involved numerous individuals who were both knowing and unknowing participants in the criminal scheme. These included Gates and Konstantin Kilimnik, Manafort’s tax preparers (Ayliff, LaPorta, Naji Lakkis, Dan Walters, and Conor O’Brien) and bookkeepers (Hesham Ali and Washkuhn), and others in Cyprus who were involved in originating and maintaining the defendant’s overseas accounts.22 Under the factors set forth in the Guidelines application notes and applied by the Fourth Circuit, application of the leadership enhancement is warranted. See United States v. Jones, 495 F. App’x 371, 373 (4th Cir. 2012) (“In determining a defendant’s leadership and organizational role, sentencing courts must consider seven factors: [T]he exercise of decision making authority, the nature of participation in the commission of the offense, the recruitment of accomplices, the claimed right to a larger share of the fruits of the crime, the degree of participation in planning or organizing the offense, the nature and scope of the illegal activity, and the degree of control and authority 22 The corporate entity and bank account documents relating to the overseas accounts listed a variety of individuals associated with Dr. Kypros Chrysostomides firm’s, including Eleni Chrysostomides, Chrystalla Pitsilli Dekatris, Myrianthi Christou, Evelina Georgiades, and Georgoula Mavrides. See e.g., Government Exhibit 63 (chart of foreign entities); Government Exhibit 73B (chart listing bank accounts). 14 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 15 of 27 PageID# 6870 exercised over others. U.S.S.G. § 3B1.1, cmt. n.4.”).23 Further, even to the extent that Gates profited from this scheme, including by stealing from Manafort, his profits from these crimes paled in comparison to Manafort’s gain. B. Bank Fraud Guidelines (Group 2) 1. The PSR Correctly Calculated the Fraud Loss The Probation Department assessed the fraud loss to be approximately $6 million for the counts of conviction for bank fraud together with the relevant conduct. See PSR, at ¶ 87. Manafort contends that the assessed fraud loss is overstated because the Citizens Bank loan conspiracy relating to Union Street property charged in Count 28 never closed and, had it closed, Manafort speculates that he would have fully collateralized the loan, resulting in no loss. See Defense Objections to PSR, at 4. That argument ignores the trial evidence that the defendant did not intend the property he pledged as collateral to be used as such since he lied to the bank about the collateral, hiding the fact that the Union Street property had a mortgage. At trial, the government proved that the Union Street property Manafort now claims he would have pledged as part of the loan charged in Count 28 was encumbered by a $5.3 million loan from Genesis In arguing against the application of a role enhancement, Manafort relies principally on the Guidelines’ use of the phrase “criminal organization” and contends that role enhancements in § 3B1.1 are meant to be applied only “to leaders or managers of organizations that have a primary purpose of engaging in crime, such as foreign cartels that smuggle narcotics into the United States, or motorcycle gangs that unlawfully transport and distribute firearms.” Def. Obj. to PSR, at 5. Manafort cites no case law endorsing his “notin-white-collar-cases” reading of § 3B1.1, which cannot be reconciled with Fourth Circuit decisions such as Ellis and Harvey, supra. The dog-track owner who bribed state legislators in Ellis, for example, may have done it for “the primary purpose of” helping his business, not “engaging in crime,” see Def. Obj. to PSR, at 5, yet the Fourth Circuit affirmed application of the leadership enhancement to his scheme. Ellis, 951 F.2d at 585; accord Harvey, 532 F.3d at 338 (defendant sentenced for honest-services fraud involving bribery in awarding Army contracts was assessed a role enhancement). The defendant’s argument, in short, lacks merit. 23 15 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 16 of 27 PageID# 6871 Capital at the time.24 Previously, the defendant applied for a loan from Citizens Bank on the Howard Street property (Counts 24 & 25), and also failed to disclose the Genesis loan on the Union Street property, which was one of several misrepresentations charged in the indictment and proven at trial.25 Because Manafort concealed the Genesis loan and intended to continue to do so, he is not entitled to credit based on the happenstance that the bank, through its own due diligence, eventually discovered the Genesis loan. See United States v. Staples, 410 F.3d 484, 490-91 (8th Cir. 2005) (“We do not mean that the value of the collateral necessarily must be deducted from the intended loss; the defendant’s intent is the touchstone. For example, if a car were collateral in a fraudulent loan procurement case, and the defendant were to hide the car, then the court should not deduct the value of the collateral from the intended loss because under those circumstances the defendant intended the loss to encompass the value of the collateral.”) (emphasis added). 2. The Sophisticated Means Enhancement Is Appropriate The Probation Department assessed a two-level enhancement on the Group 2 offenses for the use of sophisticated means pursuant to USSG § 2B1.1(b)(10)(c). PSR ¶ 88. The defendant 24 See Government Exhibit 500 (Stipulation relating to Genesis Capital); Trial Tr, at 1911-17 (Taryn Rodriguez from Citizens Bank testified that Manafort did not list the mortgage from Genesis Capital for 377 Union Street, Brooklyn, New York on his application for the Union Street loan and that she later identified the mortgage during a records check); Government Exhibit 255 (377 Union Street Uniform Residential Loan Application). See Trial Tr. at 1743-44 (Melinda James (née Francis) from Citizens Bank testified that on Manafort’s Howard Street loan application, it indicated that there was no mortgage on the property at 377 Union Street, Brooklyn, New York); Government Exhibit 224 (email attaching schedule of Manafort’s real estate owned and reflecting there is no mortgage on Union Street property); Trial Tr. at 1284-85 (Rick Gates testified that he understood that Manafort had a mortgage on the property at 377 Union Street, Brooklyn, New York during the time of the loan application at Citizens Bank for the Howard Street property). 25 16 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 17 of 27 PageID# 6872 objects on the grounds that “there was nothing complex about simply lying to the banks,” and that the falsified documents were “simple or ham-handed.” See Defense Objections to PSR, at 4. Manafort is wrong; even if some of Manafort’s conduct may have been ham-handed not all of it was. The Guidelines affords an enhancement when “the offense otherwise involved sophisticated means and the defendant intentionally engaged in or caused the conduct constituting sophisticated means,” U.S.S.G. § 2B1.1(b)(10)(c). Application Note 9 defines “sophisticated means” as: especially complex or especially intricate offense conduct pertaining to the execution or concealment of an offense. For example, in a telemarketing scheme, locating the main office of the scheme in one jurisdiction but locating soliciting operations in another jurisdiction ordinarily indicates sophisticated means. Conduct such as hiding assets or transactions, or both, through the use of fictitious entities, corporate shells, or offshore financial accounts also ordinarily indicates sophisticated means. Id. § 2B1.1 cmt. n. 9. Here, the defendant’s conduct qualifies for the enhancement, as he routinely hid relevant transactions, falsified documentation, and made misrepresentations relating to an offshore transaction (and the existence of those assets). For example, for the two Citizens Bank loans, Manafort hid the true nature of his foreign Peranova “loan”. Manafort had first claimed the $1.5 million from Peranova, an offshore entity that he controlled, as a “loan” on his tax returns (to avoid paying taxes on the money), and when the bank needed to see less debt and more income for 2015, Manafort claimed the loan was forgiven, created a back-dated letter purporting to document the forgiveness, and instructed his tax preparer to forward that letter to the bank.26 26 See Trial Tr. at 944-69 (Testimony of Cindy LaPorta). 17 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 18 of 27 PageID# 6873 Further, for four of the five loans, Manafort materially misstated the Profit and Loss Statement from his business for the years 2015 and 2016, hiding his true income, requested those documents from his bookkeeper, altered them, and then submitted them to the bank.27 With respect to the Citizens Bank loan charged in Count 24, Manafort hid the mortgage on the Union Street property, and went to great lengths to do so including having Gates contact the mortgage broker (Donna Duggan) and having her forward an older version of the mortgage binder for the property.28 On the Banc of California fraud charged in Counts 27 and 28, Manafort hid the Howard Street mortgage. For The Federal Savings Bank loans charged in Counts 29 through 32, Manafort hid outstanding American Express debt and delinquency, falsely claiming that debt to be a loan to Gates and sending a letter to that effect to the bank. See United States v. Davis, No. 18-4080, 2018 WL 5096070, at *1 (4th Cir. Oct. 18, 2018) (unpublished) (affirming application of the sophisticated means enhancement applies where the defendant created a “multilayered scheme” and “used numerous means to conceal the fraud, including forgery, altering documentation, transferring money between accounts, and omitting property from certain accountings”). 27 See Trial Tr. at 601-30 (Testimony of Heather Washkuhn). See Trial Tr. at 1284-86 (Gates testified that at Manafort’s direction he contacted Manafort’s insurance broker and requested an old copy of the insurance binder with respect to the Union Street property, which did not reflect the current mortgage, and that he was aware that the older version was then sent to the bank to hide the fact that there was currently a mortgage on the Union Street property). 28 18 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 19 of 27 PageID# 6874 3. A Role Enhancement is Appropriate For the Group 2 Crimes The Group 2 criminal conduct involved multiple parties, individuals who were both knowing and unknowing with respect to the scheme, including co-conspirators Gates and Jeffrey Yohai, and more than a dozen bankers, accountants, and Manafort’s bookkeepers and tax preparers.29 Manafort, moreover, was the primary beneficiary of the frauds. Based on the criteria in the application note and the case law cited above, the role enhancement is equally appropriate for the Group 2 bank fraud offenses. C. The Defendant Did Not Accept Responsibility Finally, the PSR properly denied Manafort any reduction for acceptance of responsibility pursuant to § 3E1.1. PSR ¶ 96. Manafort proceeded to trial and vigorously denied his guilt. Although a trial alone does not necessarily preclude an acceptance reduction, it almost always does in circumstances like those here. Application Note 2 to § 3E1.1 suggests that the situations where a defendant proceeds to trial and qualifies for an acceptance reduction are rare, and are often limited to circumstances where the defendant proceeds to trial to challenge the constitutionality of a statute, or some other legal issue, and not the facts. See § 3E1.1, Application Note 2. That was not the case here. See e.g., United States v. Redding, 422 F. App’x 192, 195 (4th Cir. 2011) (unpublished) (“Because Redding put the government to its burden of proof and went to trial challenging his factual guilt, the district court was correct in finding the two-level reduction was inappropriate.”). Manafort cites no authority for the 29 For example, from Citizens Bank at least the following individuals were involved: David Fallarino, Melinda James (née Francis), Taryn Rodriguez, and Peggy Miceli; from the Banc of California, Perris Kaufman and Gary Seferian; and from The Federal Savings Bank: Anna Ivakhnik, Dennis Raico, Thomas Horn, James Brennan, and Steve Calk; from Nigro Karlin (the bookkeeper): Heather Washkuhn; and from KWC: Cindy LaPorta and Philip Ayliff. 19 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 20 of 27 PageID# 6875 proposition that a later plea in another prosecution—even one involving some of the same facts—negates the fact that he put the government to its proof in the Eastern District of Virginia. Further, the defendant has now conceded that he breached his plea agreement in the District of Columbia, and on February 13, 2019, in a ruling from the bench, Judge Jackson found by a preponderance of the evidence that Manafort intentionally lied to the government as to three subject areas, and had not with respect to two others. The DC Court also issued an order documenting those findings. United States v. Manafort, 1:17-cr-201 (ABJ) (D.D.C. February 13, 2019), Doc 509 (attached as Exhibit G). Finally, the defendant’s failure to file the required financial information with the Probation Department, in either district, is further evidence of his failure to accept responsibility, particularly here, where the defendant was convicted of financial crimes, including hiding his income and assets. V. Statutory Sentencing Factors Pursuant To Title 18, United States Code, Section 3553(a) The government addresses the Section 3553(a) factors below. A. The Nature and Circumstances of the Offense Manafort’s criminal conduct was serious, longstanding, and bold. He failed to pay taxes in five successive years involving more than $16 million in unreported income—and failed to identify his overseas accounts in those same returns—resulting in more than $6 million in unpaid taxes. In four successive years from 2011 to 2014, Manafort failed to report his overseas accounts to the Treasury Department, and over that period he maintained 31 accounts in three 20 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 21 of 27 PageID# 6876 foreign countries collectively holding more than $55 million in multiple currencies.30 As for his bank fraud offenses, Manafort defrauded not one financial institution but three, and sought five loans from those banks, seeking more than $25 million. Tax fraud is a serious crime and violates the most basic covenant between citizens and the government. See United States v. Zukerman, 897 F.3d 423, 428 (2d Cir. 2018) (“[t]ax crimes represent an especially damaging category of criminal offense” which “strike[] at the foundation of a functioning government’”) (citation omitted), pet. for cert. filed, No. 18-642 (Nov. 19, 2018). The defendant benefited from the protections and privileges of the law and the services of his government, while cheating it and his fellow citizens. See United State v. Trupin, 475 F.3d 71, 76 (2d Cir. 2007) (tax evader effectively “[steals] from his fellow taxpayers through his deceptions.”). The defendant’s failure to file foreign bank account reports is also significant. FBAR regulations facilitate the identification of “persons who may be using foreign financial accounts to circumvent United States law,” whether those funds are used for “illicit purposes or to identify income maintained or generated abroad.” See IRS FBAR Reference Guide, at 2 (https://www.irs.gov/pub/irs-utl/irsfbarreferenceguide.pdf). Here, Manafort’s FBAR offenses were more serious than that of a defendant who simply hides his income, like the defendant in Kim. Manafort used his foreign accounts not only to hide his income, but to launder funds, including by engaging in transactions that promoted his FARA scheme. 30 See Government Exhibit 73B (FBAR Chart for 2011), Government Exhibit 73C (FBAR Chart for 2012), Government Exhibit 73D (FBAR Chart for 2013), Government Exhibit 73E (FBAR Chart for 2014); Government Exhibit 74 (“Deposit Analysis – Foreign Source of Funds Received by Foreign Accounts,” listing total as $65,860,502.50). 21 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 22 of 27 PageID# 6877 Finally, the defendant’s bank fraud offenses are also serious, both for the number and amount of the loans and the conduct involved. Bank fraud undermines the stability of our financial system and the federally insured financial institutions that citizens rely upon that those statutes seek to protect. See United States v. Koh, 199 F.3d 632, 638 (2d Cir. 1999) (recognizing that Congress, in part through passage of the bank fraud statute, “clearly intended to protect ‘the financial integrity’ of institutions in which it had a strong federal interest, including those that are ‘federally created, controlled or insured’”) (quoting S. Rep. No. 98–225, at 377 (1983)). Manafort sought five loans totaling more than $25 million and secured funding in the amount of more than $19 million. Those facts set him far afield from the ordinary bank fraud defendant. As noted, these were not short-lived schemes. Manafort’s crimes were the product of his planning and premeditation over many years, and a result of his direct and willful conduct. Manafort’s tax crimes by any account were serious, and more serious than most given the amount of money at issue and the fact that his failure to pay the taxes owed was not caused by any necessity but simple greed. Manafort had ample funds to cover these tax payments. He simply chose not to comply with laws that would reduce his wealth. And along the way, each year, in order to successfully implement the tax scheme the defendant involved numerous other people, including both witting and unwitting participants. In every scheme, Manafort was always the principal, and almost always the exclusive beneficiary. B. History and Characteristics of the Defendant Manafort’s history and characteristics are aggravating factors. Manafort has had every opportunity to succeed. He is well educated and a member of the legal profession, attending 22 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 23 of 27 PageID# 6878 Georgetown University for college and law school. He was a successful political consultant both in the United States and abroad.31 Further, while the defendant is 69 years old and has suffered reputational harm as a result of his conviction, neither is a mitigating factor. Part H of Chapter 5 of the Sentencing Guidelines addresses age, and in effect provides that age can be considered “individually or in combination with other offender characteristics,” when “present to an unusual degree and distinguish the case from the typical cases covered by the guidelines.” U.S.S.G. § 5H1.1. Nothing about the defendant’s age is unusual. Tax offenders are often older and often, like the defendant, wealthy, but they nonetheless receive substantial terms of incarceration notwithstanding age and health issues. See, e.g., United States v. Dibbi, 413 Fed. Appx 618, 620 (4th Cir. 2011) (affirming sentence of 30 months for tax fraud and decision not to grant a downward variance based on the defendant’s health and age); United States v. Gilmartin, 12-cr287 (MGC) (SDNY) (defendant, age 70, sentenced to 48 months imprisonment for evading taxes and failing to file federal and state tax returns for over 20 years, where the tax loss was approximately $1.7 million).32 31 See Trial Tr. at 2436 (defense closing argument citing witness testimony of Tad Devine and Dan Rabin describing Manafort as a talented political consultant and citing documents detailing Manafort’s work for the presidential campaigns of Gerald Ford, Ronald Reagan, George H. W. Bush, Bob Dole, and Donald Trump); see Trial Tr. at 1133-34 (Rick Gates testified that Manafort was “probably one of the most, you know, politically brilliant strategists I've ever worked with.”). 32 See also United States v. Jackson, 10-cr-298 (CM) (SDNY) (defendant, age 57, sentenced to 63 months imprisonment for his work as a tax preparer who used a variety of deceptive practices—including claiming deceased children as dependents—as part of a scheme to prepare false tax returns and where the tax loss was approximately $1 million); United States v. Catlett, 10-CR-101 (D. Md) (defendant, age 64, sentenced to 210 months imprisonment, related to filing 275 fraudulent tax returns reporting over $22 million in false Schedule E losses, resulting in a federal tax loss of $3.8 million). 23 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 24 of 27 PageID# 6879 Manafort’s age does not eliminate the risk of recidivism he poses—particularly given that his pattern of criminal activity has occurred over more than a decade and that the most recent crimes he pled guilty to occurred from February to April 2018, when he conspired to tamper with witnesses at a time when he was under indictment in two separate districts. Further as Judge Jackson found, Manafort’s misconduct continued as recently as October 2018 when he repeatedly and intentionally lied to the government during proffer sessions and the grand jury. Courts also have rejected the premise that the reputational harm incident to every criminal conviction is a valid basis for reducing the term of imprisonment imposed on a whitecollar offender such as Manafort. Nothing about that harm, or the collateral consequences that Manafort faces, was unforeseeable at the time that he chose to engage in the charged conduct. Manafort chose to commit multiple bank frauds, even when the subject of national attention in 2016. See, e.g., United States v. Prosperi, 686 F.3d 32, 47 (1st Cir. 2012) (“It is impermissible for a court to impose a lighter sentence on a white-collar defendant than on blue-collar defendants because it reasons that white-collar defendants suffer greater reputational harm or have more to lose by conviction.”). C. The Need to Promote Respect for the Law and to Afford Adequate Deterrence to Criminal Conduct The sentence should serve to promote respect for the law and to afford both adequate specific and general deterrence as intended by Congress. With respect to general deterrence, the sentence should send a clear message that repeated choices to commit serious economic crimes have serious consequences, particularly in a matter that received national attention. The Fourth Circuit has stressed the heightened importance of general deterrence in tax cases, and in particular the need for incarceration, given the prevalence of tax offenses and the 24 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 25 of 27 PageID# 6880 comparatively few prosecutions. See United States v. Engle, 592 F.3d 495, 502 (4th Cir. 2010) (“Given the nature and number of tax evasion offenses as compared to the relatively infrequent prosecution of those offenses, we believe that the [Sentencing] Commission’s focus on incarceration as a means of third-party deterrence is wise. The vast majority of such crimes go unpunished, if not undetected. Without a real possibility of imprisonment, there would be little incentive for a wavering would-be evader to choose the straight-and-narrow over the wayward path.”). Courts have recognized that tax prosecutions are difficult and time consuming to investigate and prosecute, and require substantial resources. See Zukerman, 897 F.3d at 429 (general deterrence has an important role in tax cases “due to the significant resources required to monitor and prosecute tax cases,” which cost the government hundreds of billions of dollars annually) (internal quotation marks omitted); see also U.S.S.G Ch. 2, Part T, intro. cmt. (explaining that, in light of “the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying these guidelines,” and that “[r]ecognition that the sentence for a criminal tax case will be commensurate with the gravity of the offense should act as a deterrent to would-be violators”). Tax evasion through the use of offshore entities and bank accounts is among the most lucrative offenses and often the most difficult to investigate, which increases the need for strong deterrence and a meaningful sentence. See United States v. Hefferman, 43 F.3d 1144, 1149 (7th Cir. 1994) (“Considerations of (general) deterrence argue for punishing more heavily those offenses that either are lucrative or are difficult to detect and punish, since both attributes go to increase the expected benefits of a crime and hence the punishment required to deter it.”). Bank 25 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 26 of 27 PageID# 6881 fraud, while more common, is equally serious and the need for deterrence is also strong in light of the need to protect the integrity of the nation’s banking system. D. The Need to Avoid Unwarranted Sentencing Disparities Section 3553(a) also requires a sentence that is generally consistent with others imposed on similar offenders for similar offenses; courts are instructed “to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct.” 18 U.S.C. § 3553(a)(6). First, in this case, there are no similarly situated charged defendants, as Manafort’s co-defendant, Gates, was subservient to Manafort, and he accepted responsibility, pled guilty, and cooperated early in this investigation. The crimes at issue involved Manafort’s taxes and overseas accounts, not Gates’. With respect to the bank loans, Manafort, not Gates, principally received the proceeds. Second, given the breadth of Manafort’s criminal activity, the government has not located a comparable case with the unique array of crimes and aggravating factors. VI. Conclusion For a decade, Manafort repeatedly violated the law. Considering only the crimes charged in this district, they make plain that Manafort chose to engage in a sophisticated scheme to hide millions of dollars from United States authorities. And when his foreign income stream dissipated in 2015, he chose to engage in a series of bank frauds in the United States to maintain his extravagant lifestyle, at the expense of various financial institutions. Manafort chose to do this for no other reason than greed, evidencing his belief that the law does not apply to him. Manafort solicited numerous professionals and others to reap his ill-gotten gains. The sentence 26 Case 1:18-cr-00083-TSE Document 314 Filed 02/15/19 Page 27 of 27 PageID# 6882 in this case must take into account the gravity of this conduct, and serve to both specifically deter Manafort and those who would commit a similar series of crimes. Dated: February 15, 2018 /s/ Andrew Weissmann Greg D. Andres Brandon L. Van Grack Senior Assistant Special Counsels Special Counsel’s Office U.S. Department of Justice 950 Pennsylvania Avenue NW Washington, D.C. 20530 Telephone: (202) 616-0800 Uzo Asonye Assistant United States Attorney Eastern District of Virginia Attorneys for United States of America 27 Case Document 314-1 Filed 02/15/19 Page 1 of 2 Page D# 6883 EXHIBIT A Case 1:18-cr-00083-TSE Document 314-1 Filed 02/15/19 Page 2 of 2 PageID# 6884 VENDOR AND PROPERTY PAYMENTS FROM FOREIGN BANK ACCOUNTS Vendor Name SP&C Home Improvement Inc. 2010 2011 $ 626,760 Alan Couture $ 103,000 Scott L. Wilson Landscape & Tree Specialists, Inc. $ 237,700 Big Picture Solutions, Inc. $ 2012 2013 $ $ 1,015,960 $ 1,099,000 $ 90,953 $ 3,548,873 $ 102,006 $ 456,800 $ 939,475 $ 162,920 $ 1,661,201 $ 191,800 $ 137,850 $ 230,700 $ 85,115 $ 748,465 $ 265,800 $ 503,500 $ 500,000 390,000 Sabatello Construction of Florida, Inc. House of Bijan $ 213,280 New Leaf Landscape Maintenance LLC $ 100,000 $ 39,237 $ 362,950 $ 112,000 $ 7,500 $ 4,115 $ 134,600 Don Beyer Motors, Inc. aka Land Rover of Alexandria $ 163,705 Federal Stone and Brick LLC $ 87,000 American Service Center Associates of Alexandria, LLC aka Mercedes-Benz of Alexandria Sensoryphile, Inc. $ $ 62,750 Total $ Purchase of Property $ 500,000 $ 30,300 $ $ 1,617,190 $ 1,431,158 $ 2011 2,529,115 $ 2012 $ 1,500,000 Arlington House $ 1,900,000 Union Street Brownstone $ 3,299,500 $ 6,699,500 $ $ 9,228,615 $ Grand Total $ $ 90,945 38,650 - 1,617,190 $ $ - 1,431,158 2,864,150 $ 2013 Howard Street Condominium $ 26,025 46,450 2010 Total Total 716,200 Aegis Holdings LLC J&J Oriental Rug Gallery 2014 429,933 $ 490,000 $ 432,487 $ 332,780 $ 255,685 $ 163,705 $ 125,650 $ 62,750 $ 46,450 $ 8,871,546 2014 - 2,864,150 $ $ Total - 429,933 $ 6,699,500 $ 15,571,046 GOVERNMENT EXHIBIT U.S. v. MANAFORT, 1:18-cr-83 (T.S.E.) 72 Case Document 314-2 Filed 02/15/19 Page 1 of 2 Page D# 6885 EXHIBIT Case 1:18-cr-00083-TSE Document 314-2 Filed 02/15/19 Page 2 of 2 PageID# 6886 Paul Manafort Summary of Personal Tax Return Items and Unreported Income Tax Years 2010 to 2014 Tax Year 2010 2011 2012 2013 2014 Approx. Filing Date October 14, 2011 October 15, 2012 October 7, 2013 October 6, 2014 October 14, 2015 Foreign Account Reported (Sch. B, Line 7a} None None None None None Total Income Reported (Line 22) $504,744 $3,071,409 $5,361,007 $1,910,928 $2,984,210 Total Unreported Income $1,617,190 $1,431,158 $9,228,615 $2,864,150 $1,329,933 EXHIBIT I 77 Case Document 314-3 Filed 02/15/19 Page 1 of 13 Page D# 6887 EXHIBIT Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 2 of 13 PageID# 6888 GOVERNMENT EXHIBIT U.S. v. MANAFORT, 1:18-cr-83 (T.S.E.) 73B Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 3 of 13 PageID# 6889 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2011 Account Name, Financial Institution Maximum Item and Account Number Account Value 7 Peranova Holdings Limited Peranova Holdings Limited* 4,436,680.04 Richard Gates Konstantin Kilimnik (As of 1/15/08) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 23.84 Richard Gates Konstantin Kilimnik (As of 1/15/08) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 2,831.57 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 504,807.56 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou Bank of Cyprus 9 Serangon Holdings Limited Bank of Cyprus 10 Yiakora Ventures Limited Authorized Signers Listed on Bank Account Application $ Bank of Cyprus 8 Beneficial Owner Listed on Bank Account Application Bank of Cyprus AGGREGATE MAXIMUM VALUE: $ 8,381,798.75 *The maximum account value was converted from Euro to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 4 of 13 PageID# 6890 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2012 Account Name, Financial Institution Maximum Item and Account Number Account Value 1 Actinet Trading Limited $ Bank of Cyprus Beneficial Owner Listed on Bank Account Application 999,987.00 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Authorized Signers Listed on Bank Account Application Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 2 Actinet Trading Limited* $ Bank of Cyprus 3,416,880.00 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 3 Black Sea View Limited $ 2,519,316.94 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 1,927,720.00 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou Bank of Cyprus 4 Black Sea View Limited* Bank of Cyprus GOVERNMENT EXHIBIT U.S. v. MANAFORT, 1:18-cr-83 (T.S.E.) 73C *The maximum account value was converted from Euro to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 5 of 13 PageID# 6891 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2012 Account Name, Financial Institution Maximum Item and Account Number Account Value 5 Bletilla Ventures Limited Bletilla Ventures Limited* 5,000,000.00 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 1,849,860.00 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 531,852.76 Richard Gates Konstantin Kilimnik (As of 1/15/08) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 738.45 Richard Gates Konstantin Kilimnik (As of 1/15/08) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 66,053.30 Richard Gates Konstantin Kilimnik (As of 1/15/08) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou $ 5,679.02 Richard Gates Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou Bank of Cyprus 7 Global Highway Limited Bank of Cyprus 8 Leviathan Advisors Limited Bank of Cyprus 9 Leviathan Advisors Limited* Bank of Cyprus 10 LOAV Advisors Limited Bank of Cyprus Authorized Signers Listed on Bank Account Application $ Bank of Cyprus 6 Beneficial Owner Listed on Bank Account Application *The maximum account value was converted from Euro to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 6 of 13 PageID# 6892 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2012 Account Name, Financial Institution Maximum Item and Account Number Account Value 11 Lucicle Consultants Limited $ Bank of Cyprus Beneficial Owner Listed on Bank Account Application 1,530,903.16 Richard Gates Konstantin Kilimnik (As of 1/21/13) Authorized Signers Listed on Bank Account Application Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 12 Lucicle Consultants Limited* $ Bank of Cyprus 4,183,590.00 Richard Gates Konstantin Kilimnik (As of 1/21/13) Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 13 Olivenia Trading Limited* $ 3.28 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 740,362.98 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides Bank of Cyprus 14 Olivenia Trading Limited Bank of Cyprus *The maximum account value was converted from Euro to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case Document 314-3 Filed 02/15/19 Page 7 of 13 Page D# 6893 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2012 Bene?cial Owner Authorized Signers Account Name, Financial Institution Maximum Listed on Bank Account Listed on Bank Account Item and Account Number Account Value Application Application 15 Peranova Holdin 5 Limited 35 292668004 Richard Gates Eleni Bank of Konstantin Kilimnik (As of 1/15/08) Pitsilli Dekatris Georgoula Mavrides Myrianthi Clu'istou 16 Peranova Holdin 5 Limited* 13.08 Richard Gates Eleni Chiysostomides Bank of Konstantin Kilinmik (As of 1/ 15/08) Pitsilli Dekatris Georgoula Mavrides Myrianthi ln?istou 17 Serangon Holdin 5 Limited 35 2.3 79.44 Richard Gates Eleni Bank of Konstantin Kilinmik (As of 1/21/13) Pitsilli Dekatris Georgoula Mavrides Myrianthi hristou 18 Yiakora Ventures Limited 2650.27 Paul Manafort Eleni Bank of Konstantin Kilinmik (As of 1/21/13) Pitsilli Dekatris Georgoula Mavrides Myrianthi Clu'istou AGGREGATE MAXIMUM VALUE: 5 25,704,669.72 *The maximum account value was converted from Euro to USD on the date of occrurence per the bank statement using the website . Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 8 of 13 PageID# 6894 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2013 Account Name, Financial Institution Maximum Item and Account Number Account Value 1 Actinet Trading Limited $ Bank of Cyprus Beneficial Owner Listed on Bank Account Application 87,728.03 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Authorized Signers Listed on Bank Account Application Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 2 Actinet Trading Limited* $ Bank of Cyprus 196,511.00 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 3 Actinet Trading Limited $ 87,458.48 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 202,277.00 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides Hellenic Bank 4 Actinet Trading Limited* Hellenic Bank GOVERNMENT EXHIBIT U.S. v. MANAFORT, 1:18-cr-83 (T.S.E.) 73D *The maximum account value was converted from Euro and GBP to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 9 of 13 PageID# 6895 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2013 Account Name, Financial Institution Maximum Item and Account Number Account Value 5 Bletilla Ventures Limited Bletilla Ventures Limited* 1,568,530.54 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 276,703.00 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 833,349.39 Richard Gates Konstantin Kilimnik Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 278,614.00 Richard Gates Konstantin Kilimnik Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides Bank of Cyprus 7 Bletilla Ventures Limited Hellenic Bank 8 Bletilla Ventures Limited* Hellenic Bank 9 LOAV Advisors Limited Bank of Cyprus Authorized Signers Listed on Bank Account Application $ Bank of Cyprus 6 Beneficial Owner Listed on Bank Account Application $ 5,292.42 Richard Gates Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou *The maximum account value was converted from Euro and GBP to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 10 of 13 PageID# 6896 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2013 Account Name, Financial Institution Maximum Item and Account Number Account Value 10 Lucicle Consultants Limited $ Bank of Cyprus Beneficial Owner Listed on Bank Account Application 167,664.80 Richard Gates Konstantin Kilimnik (As of 1/21/13) Authorized Signers Listed on Bank Account Application Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 11 Lucicle Consultants Limited* $ Bank of Cyprus 288,410.00 Richard Gates Konstantin Kilimnik (As of 1/21/13) Paul Manafort Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides 12 Lucicle Consultants Limited $ 603,131.79 Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 1,427,810.00 Richard Gates Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides Hellenic Bank 13 Lucicle Consultants Limited* Hellenic Bank *The maximum account value was converted from Euro and GBP to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 11 of 13 PageID# 6897 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2013 Account Name, Financial Institution Maximum Item and Account Number Account Value 14 Marziola Holdings Limited $ Beneficial Owner Listed on Bank Account Application 2,000,000.00 Konstantin Kilimnik Hellenic Bank 15 Olivenia Trading Limited* Olivenia Trading Limited 0.64 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 601,794.98 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 601,079.22 Richard Gates Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ 11,943.28 Paul Manafort Konstantin Kilimnik (As of 1/21/13) Eleni Chrysostomides Chrystalla Pitsilli Dekatris Georgoula Mavrides Myrianthi Christou Bank of Cyprus 17 Olivenia Trading Limited Hellenic Bank 18 Yiakora Ventures Limited Bank of Cyprus Eleni Chrysostomides Chrystalla Pitsilli Dekatris Myrianthi Christou Evelina Georgiades Georgoula Mavrides $ Bank of Cyprus 16 Authorized Signers Listed on Bank Account Application *The maximum account value was converted from Euro and GBP to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 12 of 13 PageID# 6898 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2013 Account Name, Financial Institution Maximum Item and Account Number Account Value 19 Pompolo Limited* Beneficial Owner Listed on Bank Account Application Authorized Signers Listed on Bank Account Application $ 1,838,260.00 Richard Gates $ 2,999,950.00 Konstantin Kilimnik Myrianthi Christou Chrystalla Dekatris Eleni Chrysostomides Georgoula Mavrides Evelina Georgiades $ 2,036,960.00 Konstantin Kilimnik Myrianthi Christou Chrystalla Dekatris Eleni Chrysostomides Georgoula Mavrides Evelina Georgiades $ 2,675,340.00 Konstantin Kilimnik Myrianthi Christou Chrystalla Dekatris Eleni Chrysostomides Georgoula Mavrides Evelina Georgiades HSBC UK 20 Global Endeavour Inc. Loyal Bank Ltd. 21 Global Endeavour Inc.* Loyal Bank Ltd. 22 Jeunet Ltd.* Loyal Bank Ltd AGGREGATE MAXIMUM VALUE: $ 18,788,808.57 *The maximum account value was converted from Euro and GBP to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case 1:18-cr-00083-TSE Document 314-3 Filed 02/15/19 Page 13 of 13 PageID# 6899 AGGREGATE MAXIMUM VALUE OF FOREIGN BANK ACCOUNTS IN 2014 Account Name, Financial Institution Maximum Item and Account Number Account Value 1 Global Endeavour Inc. Beneficial Owner Listed on Bank Account Application $ 259,797.56 Konstantin Kilimnik Myrianthi Christou Chrystalla Dekatris Eleni Chrysostomides Georgoula Mavrides Evelina Georgiades $ 1,622,660.00 Konstantin Kilimnik Myrianthi Christou Chrystalla Dekatris Eleni Chrysostomides Georgoula Mavrides Evelina Georgiades $ 860,846.00 Konstantin Kilimnik Myrianthi Christou Chrystalla Dekatris Eleni Chrysostomides Georgoula Mavrides Evelina Georgiades Loyal Bank Ltd. 2 Global Endeavour Inc.* Loyal Bank Ltd. 3 Jeunet Ltd.* Authorized Signers Listed on Bank Account Application Loyal Bank Ltd. AGGREGATE MAXIMUM VALUE: $ 2,743,303.56 GOVERNMENT EXHIBIT U.S. v. MANAFORT, 1:18-cr-83 (T.S.E.) 73E *The maximum account value was converted from Euro to USD on the date of occurrence per the bank statement using the website https://www.oanda.com/currency/converter/. Case Document 314-4 Filed 02/15/19 Page 1 of 42 Page D# 6900 EXHIBIT Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 2Page of 421PageID# of 17 6901 U.S. Department of Justice The Special Counsel's Office Washington, D.C. 20530 September 13, 2018 Kevin M. Downing, Esq. Law Office of Kevin M. Downing 601 New Jersey Avenue NW Suite 620 Washington, DC 20001 E SEP 14 20\8 Clerk, U.S. District & Bankruptcy courts for the District of Columbia Thomas E. Zehnle, Esq. Law Office of Thomas E. Zehnle 601 New Jersey Avenue NW Suite 620 Washington, DC 20001 Richard W. Westling, Esq Epstein Becker Green 1227 25 th Street NW Suite 700 Washington, DC 20037 Re: United States v. Paul .J. Manafort, Jr.. , I rim. No. 17-201-/ (ABJ) Dear Counsel: This letter sets forth the full and complete plea offer to your client Paul J. Manafort, Jr. (hereinafter referred to as "your client" or "defendant") from the Special Counsel's Office (hereinafter also referred to as "the Government" or "this Office"). If your client accepts the terms and conditions of this offer, please have your client execute this document in the space provided below. Upon receipt of the executed document, this letter will become the Plea Agreement (hereinafter referred to as the "Agreement"). The terms of the offer are as follows. 1. Charges and Statutory Penalties Your client agrees to plead guilty in the above-captioned case to all elements of all objects of all the charges in a Superseding Criminal Information, which will encompass the charges in Counts One and Two of a Superseding Criminal Information, charging your client with: A. conspiracy against the United States, in violation of 18 U.S.C. § 371 (which includes a conspiracy to: (a) money launder (in violation of 18 U.S.C. § 1956); (b) commit tax fraud Page 1 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 3Page of 422PageID# of 17 6902 (in violation of 26 U.S.C. § 7206(1)); (c) fail to file Foreign Bank Account Reports (in violation of 31 U.S.C. §§ 5314 and 5322(b)); (d) violate the Foreign Agents Registration Act (in violation of22 U.S.C. §§ 612, 618(a)(l), and 618(a)(2)); and (e) to lie to the Department of Justice (in violation of 18 U.S.C. § l00l(a) and 22 U.S.C. §§ 612 and 618(a)(2)); and B. conspiracy against the United States, in violation of 18 U.S.C. § 371, to wit: conspiracy to obstruct justice by tampering with witnesses while on pre-trial release (in violation of 18 U.S.C. § 1512). The defendant also agrees not to appeal any trial or pre-trial issue in the Eastern District of Virginia, or to challenge in the district court any such issue, and admits in the attached "Statement of the Offense" his guilt of the remaining counts against him in United States v. Paul J. Manafort, Jr., Crim. No. 1:18-cr-83 (TSE) (hereafter "Eastern District of Virginia.") A copy of the Superseding Criminal Information and Statement of the Offense are attached. Your client understands that each violation of 18 U.S.C. § 371 carries a maximum sentence of 5 years' imprisonment; a fine of not more than $250,000, pursuant to 18 U.S.C. § 3571(b)(3); a term of supervised release of not more than 3 years, pursuant to 18 U.S.C. § 3583(b)(2); and an obligation to pay any applicable interest or penalties on fines and restitution not timely made, and forfeiture. In addition, your client agrees to pay a mandatory special assessment of $200 to the Clerk of the United States District Court for the District of Columbia. Your client also understands that, pursuant to 18 U.S.C. § 3572 and§ 5El.2 of the United States Sentencing Guidelines, Guidelines Manual (2016) (hereinafter "Sentencing Guidelines," "Guidelines," or "U.S.S.G."), the Court may also impose a fine that is sufficient to pay the federal government the costs of any imprisonment, term of supervised release, and period of probation. 2. Factual Stipulations Your client agrees that the attached Statement of the Offense fairly and accurately describes and summarizes your client's actions and involvement in the offenses to which your client is pleading guilty, as well as crimes charged in the Eastern District of Virginia that remain outstanding, as well as additional acts taken by him. Please have your client sign and return the Statement of the Offense, along with this Agreement. 3. Additional Cbar·ges In consideration of your client's guilty plea to the above offenses, and upon the completion of full cooperation as described herein and fulfillment of all the other obligations herein, no additional criminal charges will be brought against the defendant for his heretofore disclosed participation in criminal activity, including money laundering, false statements, personal and corporate tax and FBAR offenses, bank fraud, Foreign Agents Registration Act violations for his work in Ukraine, and obstruction of justice. In addition, subject to the terms of this Agreement, at the time of sentence or at the completion of his successful cooperation, whichever is later, the Government will move to dismiss the remaining counts of the Indictment Page 2 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 4Page of 423PageID# of 17 6903 in this matter and in the Eastern District of Virginia and your client waives venue as to such charges in the event he breaches this Agreement. Your client also waives all rights under the Speedy Trial act as to any outstanding charges. 4. Sentencing Guidelines Analysis Your client understands that the sentence in this case will be determined by the Court, pursuant to the factors set forth in 18 U.S.C. § 3553(a), including a consideration of the applicable guidelines and policies set forth in the Sentencing Guidelines. Pursuant to Federal Rule of Criminal Procedure 11 (c)(1 )(B), and to assist the Court in determining the appropriate sentence, the Office estimates the Guidelines as follows: A. Estimated Offense Level Under the Guidelines Base offense level +8 +22 2S1.l(a) Base Offense Level: (1) The offense level for the underlying offense from which the laundered funds were derived, if (A) the defendant committed the underlying offense (or would be accountable for the underlying offense under subsection (a)(l)(A) of §lBl.3 (Relevant Conduct)); and (B) the offense level for that offense can be determined; or (2) 8 plus the number of offense levels from the table in §2Bl.1 (Theft, Property Destruction, and Fraud) corresponding to the value of the laundered funds, otherwise. Using more than $25 million threshold under 2Bl.1 Enhancement +2 Enhancement +2 Enhancement: +4 Enhancement: Combined Offense level Acceptance: Total for Counts One and Two: +2 +0 2S1.l(b)(2)(B) permits enhancement for 2 points if the conviction is pursuant to ~ 1956. 2S1. l(b)(3) adds two points for sophisticated laundering (which the guidelines lists as involving shell corporations and offshore financial accounts. 3Bl.l(a) aggravating role - 5 or more participants or otherwise extensive 3Cl.1 obstruction 3D1.4 -3 37 3El.l(b) acceptance of responsibility Advisory guidelines range of 210-262 Page 3 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 5Page of 424PageID# of 17 6904 The defendant agrees that all of the Sentencing Guidelines for money laundering applicable to charges brought under 18 U.S.C. § 1956 apply to Count One of the Superseding Criminal Information brought under 18 U.S.C. § 371. For the purposes of the Sentencing Guidelines analysis, the government calculates the highest guideline range among the offenses, namely the object of the conspiracy to violate Title 18 U.S.C. § 1956. The defendant's estimated guideline range for Count Two, the conspiracy to obstruct justice, is 30 (before any reduction for acceptance of responsibility), and would be grouped with Count One pursuant to §3D1.2(c). B. Acceptance of Responsibility The Government agrees that a 2-level reduction will be appropriate, pursuant to U.S.S.G. § 3E 1.1, provided that your client clearly demonstrates acceptance of responsibility, to the satisfaction of the Government, through your client's allocution, adherence to every provision of this Agreement, and conduct between entry of the plea and imposition of sentence. If the defendant has accepted responsibility as described above, and if the defendant pleads guilty on or before September 14, 2018, subject to the availability of the Court, an additional one-level reduction will be warranted, pursuant to U.S.S.G. § 3El.l(b). Nothing in this Agreement limits the right of the Government to seek denial of the adjustment for acceptance ofresponsibility, pursuant to U.S.S.G. § 3El.l, and/or imposition of an adjustment for obstruction of justice, pursuant to U.S.S.G. § 3Cl.l, regardless of any agreement set forth herein, should your client move to withdraw his guilty plea after it is entered, or should it be determined by the Government that your client has either (a) engaged in conduct, unknown to the Government at the time of the signing of this Agreement, that constitutes obstruction of justice, or (b) engaged in additional criminal conduct after signing this Agreement. In accordance with the above, the applicable Guidelines Offense Level will be at least 37. C. Estimated Criminal History Category Based upon the information now available to this Office, your client has no criminal convictions, other than in the Eastern District of Virginia. Your client acknowledges that depending on when he is sentenced here and how the Guidelines are interpreted, he may have a criminal history. If additional convictions are discovered during the pre-sentence investigation by the United States Probation Office, your client's criminal history points may increase. D. Estimated Applicable Guidelines Range Based upon the total offense level and the estimated criminal history category set forth above, the Office calculates your client's estimated Sentencing Guidelines range is 210 months to 262 months' imprisonment (the "Estimated Guidelin~s Range"). In addition, the Office calculates that, pursuant to U.S.S.G. § 5El.2, should the Court impose a fine, at Guidelines level Page 4 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 6Page of 425PageID# of 17 6905 37, the estimated applicable fine range is $40,000 to $400,000. Your client reserves the right to ask the Court not to impose any applicable fine. Your client agrees that, solely for the purposes of calculating the applicable range under the Sentencing Guidelines, a downward departure from the Estimated Guidelines Range set forth above is not warranted, subject to the paragraphs regarding cooperation below. Accordingly, you will not seek any departure or adjustment to the Estimated Guidelines Range set forth above, nor suggest that the Court consider such a departure or adjustment for any other reason other than those specified above. Your client also reserves the right to disagree with the Estimated Guideline Range calculated by the Office with respect to role in the offense. However, your client understands and acknowledges that the Estimated Guidelines Range agreed to by the Office is not binding on the Probation Office or the Court. Should the Court or Probation Office determine that a different guidelines range is applicable, your client will not be permitted to withdraw his guilty plea on that basis, and the Government and your client will still be bound by this Agreement. Your client understands and acknowledges that the terms of this section apply only to conduct that occurred before the execution of this Agreement. Should your client engage in any conduct after the execution of this Agreement that would form the basis for an increase in your client's base offense level or justify an upward departure (examples of which include, but are not limited to, obstruction of justice, failure to appear for a court proceeding, criminal conduct while pending sentencing, and false statements to law enforcement agents, the probation officer, or the Court), the Government is free under this Agreement to seek an increase in the base offense level based on that post-agreement conduct. 5. Agreement as to Sentencing Allocution Based upon the information known to the Government at the time of the signing of this Agreement, the parties further agree that a sentence within the Estimated Guidelines Range (or below) would constitute a reasonable sentence in light of all of the factors set forth in 18 U.S.C. § 3553(a), should such a sentence be subject to appellate review notwithstanding the appeal waiver provided below. 6. Reservation of Allocution The Government and your client reserve the right to describe fully, both orally and in writing, to the sentencing judge, the nature and seriousness of your client's misconduct, including any misconduct not described in the charge to which your client is pleading guilty. The parties also reserve the right to inform the presentence report writer and the Courts of any relevant facts, to dispute any factual inaccuracies in the presentence report, and to contest any matters not provided for in this Agreement. In the event that the Courts considers any Sentencing Guidelines adjustments, departures, or calculations different from any agreements contained in this Agreement, or contemplates a sentence outside the Guidelines range based upon the general sentencing factors listed in 18 U.S.C. § 3553(a), the parties reserve the right to answer any related inquiries from the Courts. In addition, your client acknowledges that the Page 5 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 7Page of 426PageID# of 17 6906 Government is not obligated to file any post-sentence downward departure motion in this case pursuant to Rule 35(b) of the Federal Rules of Criminal Procedure. 7. Court Not Bound by this Agreement or the Sentencing Guidelines Your client understands that the sentence in this case will be imposed in accordance with 18 U.S.C. § 3553(a), upon consideration of the Sentencing Guidelines. Your client further understands that the sentence to be imposed is a matter solely within the discretion of the Courts. Your client acknowledges that the Courts are not obligated to follow any recommendation of the Government at the time of sentencing or to grant a downward departure based on your client's substantial assistance to the Government, even if the Government files a motion pursuant to Section SK 1.1 of the Sentencing Guidelines. Your client understands that neither the Government's recommendation nor the Sentencing Guidelines are binding on the Courts. Your client acknowledges that your client's entry of a guilty plea to the charged offenses authorizes the Court to impose any sentence, up to and including the statutory maximum sentence, which may be greater than the applicable Guidelines range determined by the Court. Although the parties agree that the sentences here and in the Eastern District of Virginia should run concurrently to the extent there is factual overlap (i.e. the tax and foreign bank account charges), that recommendation is not binding on either Court. The Government cannot, and does not, make any promise or representation as to what sentences your client will receive. Moreover, your client acknowledges that your client will have no right to withdraw your client's plea of guilty should the Courts impose sentences that are outside the Guidelines range or if the Courts do not follow the Government's sentencing recommendation. The Government and your client will be bound by this Agreement, regardless of the sentence imposed by the Courts. Any effort by your client to withdraw the guilty plea because of the length of the sentence shall constitute a breach of this Agreement. 8. Cooperation Your client shall cooperate fully, truthfully, completely, and forthrightly with the Government and other law enforcement authorities identified by the Government in any and all matters as to which the Government deems the cooperation relevant. This cooperation will include, but is not limited to, the following: (a) The defendant agrees to be fully debriefed and to attend all meetings at which his presence is requested, concerning his participation in and knowledge of all criminal activities. (b) The defendant agrees to furnish to the Government all documents and other material that may be relevant to the investigation and that are in the defendant's possession or control and to participate in undercover activities pursuant to the specific instructions of law enforcement agents or the Government. (c) The defendant agrees to testify at any proceeding in the District of Colombia or elsewhere as requested by the Government. Page 6 of 17 t}I Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 8Page of 427PageID# of 17 6907 (d) The defendant consents to adjournments of his sentences as requested by the Government. (e) The defendant agrees that all of the defendant's obligations under this agreement continue after the defendant is sentenced here and in the Eastern District of Virginia; and (f) The defendant must at all times give complete, truthful, and accurate information and testimony, and must not commit, or attempt to commit, any further crimes. Your client acknowledges and understands that, during the course of the cooperation outlined in this Agreement, your client will be interviewed by law enforcement agents and/or Government attorneys. Your client waives any right to have counsel present during these interviews and agrees to meet with law enforcement agents and Government attorneys outside of the presence of counsel. If, at some future point, you or your client desire to have counsel present during interviews by law enforcement agents and/or Government attorneys, and you communicate this decision in writing to this Office, this Office will honor this request, and this change will have no effect on any other terms and conditions of this Agreement. Your client shall testify fully, completely and truthfully before any and all Grand Juries in the District of Columbia and elsewhere, and at any and all trials of cases or other court proceedings in the District of Columbia and elsewhere, at which your client's testimony may be deemed relevant by the Government. Your client understands and acknowledges that nothing in this Agreement allows your client to commit any criminal violation of local, state or federal law during the period of your client's cooperation with law enforcement authorities or at any time prior to the sentencing in this case. The commission of a criminal offense during the period of your client's cooperation or at any time prior to sentencing will constitute a breach of this Agreement and will relieve the Government of all of its obligations under this Agreement, including, but not limited to, its obligation to inform this Court of any assistance your client has provided. However, your client acknowledges and agrees that such a breach of this Agreement will not entitle your client to withdraw your client's plea of guilty or relieve your client of the obligations under this Agreement. Your client agrees that the sentencing in this case and in the Eastern District of Virginia may be delayed until your client's efforts to cooperate have been completed, as determined by the Government, so that the Courts will have the benefit of all relevant information before a sentence is imposed. 9. Government's Obligations Page 7 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 9Page of 428PageID# of 17 6908 The Government will bring to the Courts' attention at the time of sentencing the nature and extent of your client's cooperation or lack of cooperation. The Government will evaluate the full nature and extent of your client's cooperation to determine whether your client has provided substantial assistance in the investigation or prosecution of another person who has committed an offense. If this Office determines that the defendant has provided substantial assistance in the form of truthful information and, where applicable, testimony, the Office will file motions pursuant to Section 5Kl.1 of the United States Sentencing Guidelines. Defendant will then be free to argue for any sentence below the advisory Sentencing Guidelines range calculated by the Probation Office, including probation. 10. Waivers A. Venue Your client waives any challenge to venue in the District of Columbia. B. Statute of Limitations Your client agrees that, should any plea or conviction following your client's pleas of guilty pursuant to this Agreement, or the guilty verdicts in the Eastern District of Virginia, be vacated, set aside, or dismissed for any reason (other than by government motion as set forth herein), any prosecution based on the conduct set forth in the attached Statement of the Offense, as well as any crimes that the Government has agreed not to prosecute or to dismiss pursuant to this Agreement, that is not time-barred by the applicable statute oflimitations on the date of the signing of this Agreement, may be commenced or reinstated against your client, notwithstanding the expiration of the statute of limitations between the signing of this Agreement and the commencement or reinstatement of such prosecution. It is the intent of this Agreement to waive all defenses based on the statute of limitations with respect to any prosecution of conduct set forth in the attached Statement of the Offense, or any other crimes that the Government has agreed not to prosecute, that are not time-barred on the date that this Agreement is signed. The Office and any other party will be free to use against your client, directly and indirectly, in any criminal or civil proceeding, all statements made by your client, including the Statement of the Offense, and any of the information or materials provided by your client, including such statements, information, and materials provided pursuant to this Agreement or during the course of any debriefings conducted in anticipation of, or after entry of, this Agreement, whether or not the debriefings were previously a part of proffer-protected debriefings, and your client's statements made during proceedings before the Court pursuant to Rule 11 of the Federal Rules of Criminal Procedure. C. Trial and Other Rights Your client understands that by pleading guilty in this case your client agrees to waive certain rights afforded by the Constitution of the United States and/or by statute or rule. Your client agrees to forgo the right to any further discovery or disclosures of information not already provided at the time of the entry of your client's guilty plea. Your client also agrees to waive, Page 8 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 10 Page of 429 PageID# of 17 6909 among other rights, the right to be indicted by a Grand Jury, the right to plead not guilty, and the right to a jury trial. If there were a jury trial, your client would have the right to be represented by counsel, to confront and cross-examine witnesses against your client, to challenge the admissibility of evidence offered against your client, to compel witnesses to appear for the purpose of testifying and presenting other evidence on your client's behalf, and to choose whether to testify. If there were a jury trial and your client chose not to testify at that trial, your client would have the right to have the jury instructed that your client's failure to testify could not be held against your client. Your client would further have the right to have the jury instructed that your client is presumed innocent until proven guilty, and that the burden would be on the United States to prove your client's guilt beyond a reasonable doubt. If your client were found guilty after a trial, your client would have the right to appeal your client's conviction. Your client understands that the Fifth Amendment to the Constitution of the United States protects your client from the use of compelled self-incriminating statements in a criminal prosecution. By entering a plea of guilty, your client knowingly and voluntarily waives or gives up your client's right against compelled self-incrimination. Your client acknowledges discussing with you Rule l l(f) of the Federal Rules of Criminal Procedure and Rule 410 of the Federal Rules of Evidence, which ordinarily limit the admissibility of statements made by a defendant in the course of plea discussions or plea proceedings if a guilty plea is later withdrawn. Your client knowingly and voluntarily hereby waives the rights that arise under these rules to object to the use of all such statements by him on and after September 10, 2018, in the event your client breaches this agreement, withdraws his guilty plea, or seeks to withdraw from this Agreement after signing it. This Agreement supersedes the proffer agreement between the Government and the client. Your client also agrees to waive all constitutional and statutory rights to a speedy sentence and agrees that the pleas of guilty pursuant to this Agreement will be entered at a time decided upon by the parties with the concurrence of the Court. Your client understands that the date for sentencing will be set by the Courts. Your client agrees not to accept remuneration or compensation of any sort, directly or indirectly, for the dissemination through any means, including but not limited to books, articles, speeches, biogs, podcasts, and interviews, however disseminated, regarding the conduct encompassed by the Statement of the Offense, or the investigation by the Office or prosecution of any criminal or civil cases against him. D. Appeal Rights Your client understands that federal law, specifically 18 U.S.C. § 3742, affords defendants the right to appeal their sentences in certain circumstances. Your client agrees to waive the right to appeal the sentences in this case and the Eastern District of Virginia, including but not limited to any term of imprisonment, fine, forfeiture, award of restitution, term or condition of supervised release, authority of the Courts to set conditions of release, and the manner in which the sentences were determined, except to the extent the Courts sentence your client above the statutory maximum or guidelines range determined by the Courts or your client claims that your client received ineffective assistance of counsel, in which case your client would Page 9 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 11 Page of 42 10PageID# of 17 6910 have the right to appeal the illegal sentence or above-guidelines sentence or raise on appeal a claim of ineffective assistance of counsel, but not to raise on appeal other issues regarding the sentencings. In agreeing to this waiver, your client is aware that your client's sentences have yet to be determined by the Courts. Realizing the uncertainty in estimating what sentences the Courts ultimately will impose, your client knowingly and willingly waives your client's right to appeal the sentence, to the extent noted above, in exchange for the concessions made by the Government in this Agreement. E. Collateral Attack Your client also waives any right to challenge the conviction entered or sentence imposed under this Agreement or in the Eastern District of Virginia or otherwise attempt to modify or change the sentences or the manner in which they were determined in any collateral attack, including, but not limited to, a motion brought under 28 U.S.C. § 2255 or Federal Rule of Civil Procedure 60(b), except to the extent such a motion is based on a claim that your client received ineffective assistance of counsel. Your client agrees that with respect to all charges referred to herein he is not a "prevailing party" within the meaning of the "Hyde Amendment," 18 U.S.C. § 3006A note, and will not file any claim under that law. F. Privacy Act and FOIA Rights Your client also agrees to waive all rights, whether asserted directly or by a representative, to request or receive from any department or agency of the United States any records pertaining to the investigation or prosecution of this case, including and without limitation any records that may be sought under the Freedom oflnformation Act, 5 U.S.C. § 552, or the Privacy Act, 5 U.S.C. § 552a, for the duration of the Special Counsel's investigation. 11. Restitution Your client understands that the Court has an obligation to determine whether, and in what amount, mandatory restitution applies in this case under 18 U.S.C. § 3663A. The Government and your client agree that mandatory restitution does not apply in this case. 12. Forfeiture a) Your client agrees to the forfeiture set forth in the Forfeiture Allegations in the Superseding Criminal Information to which your client is pleading guilty. Your client further agrees to forfeit criminally and civilly the following properties (collectively, the "Forfeited Assets") to the United States pursuant to Title 18, United States Code, Sections 981(a)(l)(A), 981(a)(l)(C), 982(a)(l), 982(a)(2); Title 21, United States Code, Section 853(p), and Title 28 U.S.C. § 2461(c), and further agrees to waive all interest in such assets in any administrative or judicial forfeiture proceeding, whether criminal or civil, state or federal: 1) The real property and premises commonly known as 377 Union Street, Brooklyn, New Page 10 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 12 Page of 42 11PageID# of 17 6911 York 11231 (Block 429, Lot 65), including all appurtenances, improvements, and attachments thereon, and any property traceable thereto; 2) The real property and premises commonly known as 29 Howard Street, #4D, New York, New York 10013 (Block 209, Lot 1104), including all appurtenances, improvements, and attachments thereon, and any property traceable thereto; 3) The real property and premises commonly known as 174 Jobs Lane, Water Mill, New York 11976, including all appurtenances, improvements, and attachments thereon, and any property traceable thereto; 4) All funds held in account number property traceable thereto; 0969 at The Federal Savings Bank, and any 5) All funds seized from account number property traceable thereto; 6) All funds seized from account number property traceable thereto; 1388 at Capital One N.A., and any 9952 at The Federal Savings Bank, and any 7) Northwestern Mutual Universal Life Insurance Policy and any property traceable thereto; 8) The real property and premises commonly known as 123 Baxter Street, #5D, New York, New York 10016 in lieu of 1046 N. Edgewood Street; and 9) The real property and premises commonly known as 721 Fifth Avenue, #43G, New York, New York 10022 in lieu of all funds from account number ~ at Charles Schwab & Co. Inc., and any property traceable thereto. Your client agrees that his consent to forfeiture is final and irrevocable as to his interests in the Forfeited Assets. b) Your client agrees that the facts set forth in the Statement of Facts and admitted to by your client establish that the Forfeited Assets are forfeitable to the United States pursuant to Title 18, United States Code, Sections 981 and 982, Title 21, United States Code, Section 853, and Title 28, United States Code, Section 2461. Your client admits that the Forfeited Assets numbered 1 through 7, above, represent property that constitutes or is derived from proceeds of, and property involved in, the criminal offenses in the Superseding Criminal Information to which . your client is pleading guilty. Your client further agrees that all the Forfeited Assets (numbered 1 through 9) can additionally be considered substitute assets for the purpose of forfeiture to the United States pursuant to Title 18, United States Code, Section 982(b); Title 21, United States Code, Section 853(p); and Title 28, United States Code, Section 2461(c). Page 11 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 13 Page of 42 12PageID# of 17 6912 c) Your client agrees that the Court may enter a preliminary order of forfeiture for the Forfeited Assets at the time of your client's guilty plea or at any time before sentencing, and consents thereto. Your client agrees that the Court can enter a Final Order of Forfeiture for the Forfeited Assets, and could do so as part of his sentence. d) Your client further agrees that the government may choose in its sole discretion how it wishes to accomplish forfeiture of the property whose forfeiture your client has consented to in this plea agreement, whether by criminal or civil forfeiture, using judicial or non-judicial forfeiture processes. If the government chooses to effect the forfeiture provisions of this plea agreement through the criminal forfeiture process, your client agrees to the entry of orders of forfeiture for such property and waives the requirements of Federal Rules of Criminal Procedure 1 l(b)(l)(J) and 32.2 regarding notice of the forfeiture in the charging instrument, advice regarding the forfeiture at the change-of-plea hearing, announcement of the forfeiture at sentencing, and incorporation of the forfeiture in the judgment. e) Your client understands that the United States may institute civil or administrative forfeiture proceedings against all forfeitable property in which your client has an interest, including the Forfeited Assets, without regard to the status of his criminal conviction. Your client further consents to the civil forfeiture of the Forfeited Assets to the United States, without regard to the status of his criminal conviction. In connection therewith, your client specifically agrees to waive all right, title, and interest in the Forfeited Assets, both individually and on behalf of DMP International, Summerbreeze LLC, or any other entity of which he is an officer, member, or has any ownership interest. Your client waives all defenses based on statute of limitations and venue with respect to any administrative or civil forfeiture proceeding related to the Forfeited Assets. f) Your client represents that with respect to each of the Forfeited Assets, he is either the sole and rightful owner and that no other person or entity has any claim or interest, or that he has secured the consent from any other individuals or entities having an interest in the Forfeited Assets to convey their interests in the Forfeited Assets to him prior to entry of the Order of Forfeiture (with the exception of previously disclosed mortgage holders). Your client warrants that he has accurately represented to the Government all those individuals and entities having an interest in the Forfeited Assets and the nature and extent of those interests, including any mortgages or liens on the Forfeited Assets. Your client agrees to take all steps to pass clear title to the Forfeited Assets to the United States (with the exception of previously disclosed mortgage liens). Your client further agrees to testify truthfully in any judicial forfeiture proceeding, and to take all steps to effectuate the same as requested by the Government. Your client agrees to take all steps requested by the Government to obtain from any other parties by any lawful means any records of assets owned at any time by your client, including but not limited to the Forfeited Assets, and to otherwise facilitate the effectuation of forfeiture and the maximization of the value of Forfeited Assets for the United States. g) Your client agrees that, to the extent that he does not convey to the United States Page 12 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 14 Page of 42 13PageID# of 17 6913 clear title to each of the Forfeited Assets, the United States is entitled, in its sole discretion, either to vacatur of the plea agreement or to forfeiture to the United States of a sum of money equal to the value of that asset at the time this agreement was executed. Your client consents to modification of any Order of Forfeiture at any point to add such sum of money as a forfeiture judgment in substitution for Forfeited Assets. h) Your client hereby abandons any interest he has in all forfeitable property and consents to any disposition of the property by the government without further notice or obligation whatsoever owning to your client. i) Your client agrees not to interpose any claim, or to assist others to file or interpose any claim, to the Forfeited Assets in any proceeding, including but not limited to any civil or administrative forfeiture proceedings and any ancillary proceedings related to criminal forfeiture. Your client agrees that he shall not file any petitions for remission, restoration, or any other assertion of ownership or request for return relating to the Forfeited Assets, or any other action or motion seeking to collaterally attack the seizure, restraint, forfeiture, or conveyance of the Forfeited Assets, nor shall your client assist any other in filing any such claims, petitions, actions, or motion. Contesting or assisting others in contesting forfeiture shall constitute a material breach of the Agreement, relieving the United States of all its obligations under the Agreement. Your client agrees not to seek or accept, directly or indirectly, reimbursement or indemnification from any source with regard to the assets forfeited pursuant to this Agreement. j) In the event your client fails to deliver the assets forfeited pursuant to this agreement, or in any way fails to adhere to the forfeiture provisions of this agreement, the United States reserves all remedies available to it, including but not limited to vacating the Agreement based on a breach of the Agreement by your client. k) Your client agrees that the forfeiture provisions of this plea agreement are intended to, and will, survive him notwithstanding the abatement of any underlying criminal conviction after the execution of this Agreement. 1) Your client agrees that he will not claim, assert, or apply for, directly or indirectly, any tax deduction, tax credit, or any other taxable offset with regard to any federal, state, or local tax or taxable income for payments of any assets forfeited pursuant to this Agreement. m) Your client agrees to waive all constitutional and statutory challenges in any manner (including, but not limited to, direct appeal) to any forfeiture carried out in accordance with this Agreement on any grounds, including that the forfeiture constitutes an excessive fine or punishment. Page 13 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 15 Page of 42 14PageID# of 17 6914 13. Breach of Agreement Your client understands and agrees that, if after entering this Agreement, your client fails specifically to perform or to fulfill completely each and every one of your client's obligations under this Agreement, or engages in any criminal activity prior to sentencing or during his cooperation (whichever is later), your client will have breached this Agreement. Should it be judged by the Government in its sole discretion that the defendant has failed to cooperate fully, has intentionally given false, misleading or incomplete information or testimony, has committed or attempted to commit any further crimes, or has otherwise violated any provision of this agreement, the defendant will not be released from his pleas of guilty but the Government will be released from its obligations under this agreement, including (a) not to oppose a downward adjustment of two levels for acceptance of responsibility described above, and to make the motion for an additional one-level reduction described above and (b) to file the motion for a downward departure for cooperation described above. Moreover, the Government may withdraw the motion described above, if such motion has been filed prior to sentencing. In the event that it is judged by the Government that there has been a breach: (a) your client will be fully subject to criminal prosecution, in addition to the charges contained in the Superseding Criminal Information, for any crimes to which he has not pled guilty, including perjury and obstruction of justice; and (b) the Government and any other party will be free to use against your client, directly and indirectly, in any criminal or civil proceeding, all statements made by your client, including the Statement of the Offense, and any of the information or materials provided by your client, including such statements, information, and materials provided pursuant to this Agreement or during the course of any debriefings conducted in anticipation of, or after entry of, this Agreement, whether or not the debriefings were previously a part of profferprotected debriefings, and your client's statements made during proceedings before the Court pursuant to Rule 11 of the Federal Rules of Criminal Procedure. Your client understands and agrees that the Government shall be required to prove a breach of this Agreement only by good faith. Nothing in this Agreement shall be construed to protect your client from prosecution for any crimes not included within this Agreement or committed by your client after the execution of this Agreement. Your client understands and agrees that the Government reserves the right to prosecute your client for any such offenses. Your client further understands that any perjury, false statements or declarations, or obstruction of justice relating to your client's obligations under this Agreement shall constitute a breach of this Agreement. In the event of such a breach, your client will not be allowed to withdraw your client's guilty plea. 14. Complete Ag1·eement Apart from the written proffer agreement initially dated September 11, 2018, which this Agreement supersedes, no agreements, promises, understandings, or representations have been Page 14 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 16 Page of 42 15PageID# of 17 6915 made by the parties or their counsel other than those contained in writing herein, nor will any such agreements, promises, understandings, or representations be made unless committed to writing and signed by your client, defense counsel, and the Office. Your client further understands that this Agreement is binding only upon the Office. This Agreement does not bind any United States Attorney's Office, nor does it bind any other state, local, or federal prosecutor. It also does not bar or compromise any civil, tax, or administrative claim pending or that may be made against your client. If the foregoing terms and conditions are satisfactory, your client may so indicate by Page 15 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 17 Page of 42 16PageID# of 17 6916 signing this Agreement and the Statement of the Offense, and returning both to the Office no later than September 14, 2018. Sincerely yours, ROBERT S. MUELLER, III Special Counsel By: d /.. b/_ ~~ Andrew Weissmann Jeannie S. Rhee Greg D. Andres Kyle R. Freeny Senior/Assistant Special Counsels Page 16 of 17 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 422 02/15/19 Filed 09/14/18 Page 18 Page of 42 17PageID# of 17 6917 DEFENDANT'S ACCEPTANCE I have read every page of this Agreement and have discussed it with my attorneys Kevin Downing, Thomas Zehnle, and Richard Westling. I am fully satisfied with the legal representation by them, who I have chosen to represent me herein. Nothing about the quality of the representation of other counsel is affecting my decision herein to plead guilty. I fully understand this Agreement and agree to it without reservation. I do this voluntarily and of my own free will, intending to be legally bound. No threats have been made to me nor am I under the influence of anything that could impede my ability to understand this Agreement fully. I am pleading guilty because I am in fact guilty of the offense identified in this Agreement. I reaffirm that absolutely no promises, agreements, understandings, or conditions have been made or entered into in connection with my decision to plead guilty except those set forth in this Agreement. I am satisfied with the legal services provided by my attorneys in connection with this Agreement and matters related to it. Date: __9_-_1_1_-~tf_ _ _ Defendant ATTORNEYS'ACKNOWLEDGMENT I have read every page of this Agreement, reviewed this Agreement with my client, Paul J. Manafort, and fully discussed the provisions of this Agreement with my client. These pages accurately and completely set forth the entire Agreement. I concur in my client's desire to plead guilty as set forth in this Agreement. Date: - - - - - -- - Ke in M. Downing 1chard W. Westling Thomas E. Zehnle Attorneys for Defendant Page 17 of 17 /fa Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 19 Page of 421 PageID# of 24 6918 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 20 Page of 422 PageID# of 24 6919 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 21 Page of 423 PageID# of 24 6920 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 22 Page of 424 PageID# of 24 6921 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 23 Page of 425 PageID# of 24 6922 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 24 Page of 426 PageID# of 24 6923 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 25 Page of 427 PageID# of 24 6924 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 26 Page of 428 PageID# of 24 6925 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 27 Page of 429 PageID# of 24 6926 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 28 Page of 42 10PageID# of 24 6927 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 29 Page of 42 11PageID# of 24 6928 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 30 Page of 42 12PageID# of 24 6929 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 31 Page of 42 13PageID# of 24 6930 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 32 Page of 42 14PageID# of 24 6931 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 33 Page of 42 15PageID# of 24 6932 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 34 Page of 42 16PageID# of 24 6933 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 35 Page of 42 17PageID# of 24 6934 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 36 Page of 42 18PageID# of 24 6935 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 37 Page of 42 19PageID# of 24 6936 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 38 Page of 42 20PageID# of 24 6937 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 39 Page of 42 21PageID# of 24 6938 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 40 Page of 42 22PageID# of 24 6939 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 41 Page of 42 23PageID# of 24 6940 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-4 Filed 423 02/15/19 Filed 09/14/18 Page 42 Page of 42 24PageID# of 24 6941 Case Document 314-5 Filed 02/15/19 Page 1 of 15 Page D# 6942 EXHIBIT Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 12 of of 14 15 PageID# PageID# 13 6943 IN THE UN ITED STATES DISTR ICT COURT FOi EASTERN DISTRICT OF VTRGIN IJ\ Alexandria Division UN ITED STATES OF AME RICA V. HYUNG KWON KIM, Defendant. ) ) ) ) ) ) ) Criminal No. I: I 7-CR-248 Hon. T. S. Ellis, IIT ) PLEA AG REEMENT Dana J. Boente. United States Attorney fo r the Eastern District of Virginia; Mark D. Lytle. Assistant Uni ted States Attorney: Stuart M. Goldberg. Acting Deputy Assistant Attorney General for the Tax Division. U.S. Department of Justice; Mark F. Daly. Senior Litigation Counsel and Robert J. Boudreau, Trial Attorney; the defe ndant, 1-lyung Kwon Kim; and the defendant's counsel have entered into an agreement pursuant to Rule 11 of the federal Rules of Crim inal Procedure. The terms of the agreement arc as fo llows: 1. Offense and Maximum Penalties The defendant agrees lo waive ind ictment and plead guilty to a single count criminal information charging the defendant with will f'u l fai lure to file a Report of Foreign Bank and Financial Accounts, FinCEN Report 11 4 (formerly TD F 90.22-1 ) (as applicable, "FBAR") with the Department ol"the Treasury, in violation of' Ti tle 31, United States Code, Sections 53 14 and 5322(a), and Title 3 1, Code or Federal Regulations, Section IOI 0.350. The maximum pcnnltics lo r thi s offense arc: a max imum term of imprisonment of fi ve years of imprisonment; a max imum fine of the grea ter o f $250.000 or twice the gross gai n or loss; a spec ial assessment, pursuant to 18 U.S.C. §§ 30 13 and 3014: and three years of Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 23 of of 14 15 PageID# PageID# 14 6944 supervised release. The defendant understands that this supervised release term is in addition to any prison term the defendant may receive, and that a violation of a term of supervised release could result in the defendant being returned to prison for the full term of supervised release. 2. Factual Basis fo r the Pica The defendant wil l plead guilty because the defendant is in fact guilty of the charged offense. The defendant admits the facts set forth in the Statement of Facts filed with this plea agreement and agrees that those facts establish guilt of the offense charged beyond a reasonable doubt. The Statement of !'acts, which is hereby incorporated into this plea agreement, constitutes a stipulation of facts for purposes of Section I Bl .2(a) of the U.S. Sentencing Commission's Sentencing Guidelines Manual ("Sentencing Guidelines"). 3. Assistance and Advice of Counsel The defendant is satisfied that his attorneys have rendered effective assistance. The defendant understands that by entering into this plea agreement, he surrenders certain rights as provided in this plea agreement. The defendant understands that the rights of criminal defendants include the following: a. the right to plead not guilty and to persist in that plea; b. the right to a jury trial; c. the right to be represented by counsel - and, if necessary, have the Court appoint counsel - at trial and at every other stage of the proceedings; and d. the right al trial to confront and to cross-examine adverse witnesses. to be protected from compel led self-incrimination, to testify and present evidence, and to compel the attendance of witnesses. Page 2 of 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 34 of of 14 15 PageID# PageID# 15 6945 4. Role of the Court and th e Probation Office The defendant understands that the Court has jurisdiction and authority to impose any sentence within the statutory max imum described above but that the Court will determine hi s actual sentence in accordance with 18 U.S.C. § 3553(a). The defendant understands that the Court has not yet dete1111ined a sentence and that any estimate of the advisory sentencing range under the Sentencing Guideli nes be may have received from his counsel, the United States, or the Probation Office, is a prediction, not a promise, and is not binding on the United States, the Probation Office, or the Court. Addi tionally, pursuant to the Supreme Court's decision in United States v. Booker, 543 U.S. 220 (2005), the Court, af1er considering the factors set forth in 18 U.S.C. § 3553(a), may impose a sentence above or below the Sentencing Guidelines ' advisory sentencing range, subject only to review by higher courts for reasonableness. The United States makes no promise or representation concerning what sentence the defendant will receive, and he cannot withdraw a guilty plea based upon the actual sentence. 5. Sentencing G uidelines The Government contends that the applicable Guideline in thi s matter should be U.S.S.G. § 2S l .3(a)(2), § 28 I. I, and § 2S1.3(b)(2) because the defendant fi led two fa lse FBARs and a fa lse U.S. Individual Income Tax Return, Form 1040, within a 12-month period. However, at the time that the defendant agreed to plead guilty, the Government consistently took the position with similarly situated defendants that the applicable Gu ideline vvas U.S.S.G. § 2TI .1 and § 2Tl .4 due to the cross reference in 2S 1.3(c)(l). Therefore. in order to ensure that the defendant receives equitable treatment, and in accordance with Federal Rule of Criminal Procedure 11 (c)( I)(B), the United States and the Page 3 of 1-t Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 45 of of 14 15 PageID# PageID# 16 6946 defendant will reconunend to the Court that the following provisions of the Sentencing Guidelines apply: a. The base offense level for this offense is 16 pursuant to U.S.S.G. § 2Tl.1 (a)(l) and § 2T4. I (F), because the tax loss exceeded $100,000; b. The base offense level is increased by 2 levels pursuant to U.S .S.G. § 2T 1.1 (b)(2) because the offense involved sophisticated means; and c. the parties agree that they are free to argue other provisions of the Sentencing Guidelines not referenced herein or the sentencing factors under 18 U.S.C. § 3553(a). The United States and the defendant also agree that he has assisted the government in the investigation and prosecution of his own misconduct by timely notifying authorities of his intention to enter a plea of guilty, thereby permitting the government to avoid preparing for trial and permitting the government and the Court to allocate their resources efficiently. If the defendant qualifies for a two-level decrease in offense level pursuant to Sentencing Guidelines § 3E 1.1 (a) and the offense level prior to the operation of that section is 16 or greater, the government agrees to file, pursuant to Sentencing Guidelines § 3El .1 (b), a motion prior to, or at the time of, sentencing for an additional one-level decrease in the defendant's offense level. 6. Waiver of Appeal, FOIA, Privacy Act Rights, Venue and Statute of Limitations The defendant also understands that 18 U.S .C. § 3742 affords him the right to appeal the sentence imposed. Nonetheless, the defendant knowingly waives the right to appeal the conviction and any sentence within the statutory maximum described above (or tbe maimer in which that sentence was detennined) on the grounds set forth in 18 U.S .C. § 3742 or on any ground whatsoever other than an ineffective assistance of counsel claim that is cognizable on Page 4 of 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 56 of of 14 15 PageID# PageID# 17 6947 direct appeal, in exchange fo r the concessions made by the United States in this plea agreement. This pica agreement does not affect the rights or obligations of the United States as set forth in 18 U.S.C. § 3742(b). The defendant hereby ,,vaives all rights, whether asserted directly or by a representati ve, to request or receive from any department or agency of the United States any records pertaining to the investigation or prosecution of th is case, including without limitation any records that may be sought under the Freedom ofln fo nnation Act, 5 U.S.C. § 552, or the Privacy Act, 5 U.S.C. § 552a. The defendant knowingly wa ives all rights to the venue requirement fo r Count One of the Information due to the fac t that venue for the crimes committed lies in any other Federal j udicial district. and the defendant further agrees to be prosecuted for this charge in the Eastern District of Virginia. The defendant knowingly wa ives all rights to raise any defense based on the fai lure of a federal grand jury or the United States to charge him with the offense described in paragraph I of this agreement within any applicable statute of limitat ions. 7. Special Assessment Before sentencing in th is case, the defendant agrees to pay a mandatory spec ial assessment of one hundred dollars ($ 100.00). 8. Pay ment of Monetary Penalties The defendant understands and agrees that, pursuant to 18 U.S.C. § 3613, whatever monetary penalties are imposed by the Court will be due immediately and subject to immediate enforcement by the United States as provided fo r in Section 3613, Furthermore, wi thin 14 days o f a request, the de fendant agrees to provide all of the defendant's financial information to the Page 5 o f 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 67 of of 14 15 PageID# PageID# 18 6948 United States and the Probation Office and, if requested, to participate in a pre-sentencing debtor's examination and/or complete a financial statement under penalty of pe1ju1y . lf the Court imposes a schedule of payments, the defendant understands that the schedule of payments is merely a minimum schedule of payments and not the only method. nor a limitation on the methods, available to the United States to enforce the judgment. If the defendant is incarcerated, he agrees voluntarily to participate in the Bureau of Prisons' Inmate Financial Responsibi lity Program, regardless of whether the Court specifically directs participation or imposes a schedule of payments. 9. Res titution The defendant agrees to the ent1y of a Restitution Order for the ful l amount of the victim's losses pursuant to 18 U.S.C. § 3663(a)(3). Victims of the conduct, as defined by 18 U.S.C. § 3663(a)(2) and described in the charging instrument or Statement of Facts or any other document describing the defendant's conduct, shall be entitled to restitution. Without limiting the amount of restitution that the Court must impose, the parties agree that, at a minimum, the fo llowing victims have suffered the following losses: Victim Name/ Address lRS- RACS Attn.: Mai l Stop 6261 , Restitution 333 West Pershing Avenue Kansas City, MO 64108 Amount of Restitut ion TBD The parties acknowledge that determination of the loss amounts for all victims in this matter is a complicated and time consuming process. To that end. the defendant agrees, pursuant to I 8 U.S.C. § 3664(d)(5), that the Court may defer the imposition of restitution unti l after the sentencing; however, the defendant specifically waives the 90 day provision found at 18 U.S.C. Page 6 of 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 78 of of 14 15 PageID# PageID# 19 6949 § 3664(d)(5) and consents to the en try o f any orders pertaining to restitution arter sentencing without limitation. If the Court orders the defendant to pay restitut ion to the IRS fo r the fai lure to pay tax, either directly as part of the sentence or as a condition of supervised release, the IRS will use the restitution order as the basis for a civil assessment. See 26 U.S.C. § 620 1(a)(4). The defendant does not have the right to chall enge the amount o f this assessment. See 26 U.S.C. § 6201 (a)(4)(C). Neither the existence of a restitution payment schedule nor the defendant's timely payment of restitution according to that schedul e wi ll preclude the IRS from administrative collection of the rest itution-based assessment, including levy and distraint under 26 U.S.C. § 633 I. 10. rmm unity from Further Prosecution in this District The United States will not further criminally prosecute the defendant in the Eastern District of Virginia fo r the specific conduct described in the in format ion or Statement of Facts. 11. Waiver of Protections of Proffer Agreement The defendant agrees that all protections set fo rth in any proffer letter executed in relation to this case are hereby waived. The defendant further agrees that the government may use all statements provided by him, without limitation. in any proceeding brought by the government, including the Internal Revenue Service, against the defendant. 12. Defendant's Cooperation The defendant agrees to cooperate full y and truthfully with the Uni ted States, and provide all information known to him regarding any criminal activity as requested by the govern ment. Ln that regard: Page 7 or 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 89 of of 14 15 PageID# PageID# 20 6950 a. The defendan t agrees to appear for and testify truthfully and completely at any grand juries. trials or other proceedi ngs. b. The defendant agrees to be reasonably available for deb1iefings, meetings, and pre-trial confe rences as the United States may require. c. The defendant agrees to provide all documents, records, writings, or materials of any kind in the defendant's possession or under his care, custody, or control relating directly or indirectly to all areas of inqui ry and investigation. Nothing in this plea agreement requii-es the defendant to waive any valid asserti on of the attorney client privilege as to counsel advising him in connection with this invest igation or any related proceeding. d. The defendant agrees that, at the request of the United States, he will voluntarily submit to polygraph examinations, and that the United States will choose the polygraph exami ner and spec ify the procedures for the examinations. e. The defendant agrees that the Statement of FacL<, is limited to information necessary to support the plea. The defendant will provide more detailed facts relating to this case during ensuing debriefi ngs. f. The defendant agrees to execute any and all instructions and authorizations to direct inclivicluals, entities, or financial institutions to provide account documents and information as well as to repatriate funds held by foreign financial institutions in order to accomplish the terms and conditions of this pi ca agreement. g. The defendant acknowledges that he is hereby on notice that he may not violate any federa l. state, or local criminal law while cooperating with the govenunent, and that the government will. in its discretion. cons ider any such violation in evaluating whether to fi le a motion fo r a downward departure or reduction of sentence. Page 8 of 1-t Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSE Document Document 314-5 10 Filed Filed 02/15/19 10/26/17 Page Page 10 9 ofof14 15PageID# PageID#21 6951 h. Noth ing in this plea agreement places any obligation on the government to seek the defendant's cooperation or assistance. 13. Use oflnformation Provided by the Defendant under this Plea Agreement. The United States will not use any truthful in fo rmation provided pursuant to this plea agreement in any criminal prosecution aga inst the defendant in the Eastern District of Virginia, except in any prosecution for a crime of violence or conspiracy to commit, or aiding and abetting, a crime of violence (as defined in 18 U.S.C. § 16). Pursuant to Sentencing Gu idelines § I B 1.8, no truthful infom1ation that the defendant provides under tl1is plea agreement wil l be used in determining the applicable Sentencing Gu idelines advisory sentencing range, except as provided in § I BI .8(b). Nothing in this plea agreement, however. restricts the Court's or Probat ion Officer's access to information and records in the possession of the United States. ru,ihermore, nothing in this plea agreement prevents the government in any way from prosecuting the defendant should he knowingly provide false, untruthful , or pe1jurious information or testimony, or from using information prov ided by the defendant in furtherance of any forfe iture action, whether criminal or civil, ad mini strative or judicial. The United States will bring this plea agreement and the full extent of the defendant's cooperation to the attention of other prosecuting offices if requested. 14. Defendant Must P rovide Full, Complete and T ruthful Cooperation This plea agreement is not conditioned upon charges being brought against any other indi vidual. This pica agreement is not cond itioned upon any outcome in any pending investigation. This plea agreement is not conditioned upon any result in any future prosecution which may occur because of the defendant's cooperation. This plea agreement is not conditi oned upon any result in any future grand jury presentation or trial involving charges Page 9 of 1-t Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 10 11 of of 14 15 PageID# PageID# 22 6952 resulting from this investigation. This pica agreement is cond itioned upon the defendant providing full. complete and truth ful cooperation. 15. Motion for a Downward D eparture The parties agree that the United States reserves the right to seek any departure from the applicable Sentencing Guidelines advisory sentencing range, pursuant to§ 5K 1.1 of the Sentencing Guideli nes and Policy Statements, or any reducti on of sentence pursuant to Federal Rule of Criminal Procedure 35(b), if, in its sole discretion, Lhe United States determi nes that such a departure or reduction of sentence is appropriate. J6. Pay ment of Taxes and Filing of T ax Returns The defendant consents to any motion by the United States, under Federal Rule of Criminal Procedure 6(e)(J)(E), to disclose grand jury material to the Internal Revenue Service (" IRS") fo r use in computing and co llecting his taxes, interest and penalties, and to the civil and fo rfeiture sections or the United States Attorney"s Office for use in identi fy ing assets and collecting fi nes and restit11ti on. The defendant also agrees to file true and correct Amended U.S. Individual Income Tax Returns, Forms I040X, for the years 2003 through 20 10 and to pay all taxes, interest and penalties for the years 2003 through 20 I0, prior to sentencing, as will be agreed upon between him and the IRS, or as otherwise imposed or assessed by the TRS. The defendant also admi ts that he willfully failed to file a tr ue and accurate FBAR fo r each required year 2003 through 2010, and agrees not to object to the assessment of fraud penalties pursuant to 26 U.S.C. § 6663 . The defendant forther agrees to make all books, records and documents available to the lRS fo r use in computing his taxes, interest and penalties for the years 1999 through 20 10. Page JO of 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 11 12 of of 14 15 PageID# PageID# 23 6953 17. Penalty Related to filing False and Frau dulent FBARs The defendant agrees that in order to resolve hi s civ il liability for both willfully failing to file FBARs and fo r willfully fi ling false and fraudul ent fBARs for years 1999 through 20 I 0, he will pay a civil penalty in the amount of $ 14,075,862 (fourteen million, seventy-five thousand, eight hundred and sixty-two dollars), equaling 50% of the total assets that the Defendant held in his undeclared accounts in Switzerl and on December 3 1, 2004. no later than ten (10) days after the entry of Judgment in this case. The defendant further agrees to cause the transfer of the funds by electronic funds transfer pursuant to written instructions to be provided by the Financial Litigation Unit of the United States Attorney's Office for the Eastern District of Virginia. The defendant further agrees to cooperate with the United States. and make best efforts to transfer and remit the funds, including taking all steps requested by any financial institution or the United States, including the execution o f all documents, orders, and/or instructions directing persons or entities acting on his behalf or in the name o f nominee holders of accounts on his behalf, providing any informat ion requested to facilitate the transfer, and granting access to infom1ation to facilitate the transfer. The defendant understands and agrees that nothing in paragraphs 15 and 16 o[, or otherwise in, this pica agreement shall prec lude or limit the IRS in its civil determination, assessment, or collect ion of any taxes, interest and/or penalties that he may owe. The defendant agrees to rile with the Financial Crimes Enfo rcement Network of the Department of the Treasury true and correct f7BARs, including amended fBARs as needed, for 1999 through 20 10. 18. Breach of this Pica Agreement and Remedies This plea agreement is effective when signed by the clele nclant, his attorney, and an attorney for the United States. The defendant agrees to entry of this plea agreement at the date Page 11 or 1-t Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 12 13 of of 14 15 PageID# PageID# 24 6954 and time scheduled with the Cou11 by the Uni ted States (in consultation with his attorney). If Lhe defendant withdrav.rs from this plea agreement. or commits or attempts to commit any additional federal, state or local crimes, or intentionally gives materially false, incomplete, or mi sleading testimony or information, or otherwise violates any provision of this plea agreement, then: a. The United States will be released from its obligations under this plea agreement, including any obligation to seek a downward departure or a reduction in sentence. The defendant, however, may not withdraw the guilty plea entered pursuant to th is plea agreement. b. The defenda111 will be subject to prosecution for any federal criminal violation, including, but not limited to, pc1jury and obstruction of justice, that is not time-barred by the applicable statute of limitations on the date this plea agreement is signed. Notwithstanding the subsequent expiration of the statute of limitations, in any such prosecution, the defendant agrees to waive any statute-of-limitations defense. c. Any prosecution, including the prosecution that is the subject of this plea agreement, may be premised upon any in formation provided, or statements made. by the defendant, and al l such information, statements, and leads derived therefrom may be used agai nst the defendant. The defendant waives any ri ght to claim that statements made before or after the date of this plea agreement, including the statement of facts accompanying this plea agreement or adopted by the defendant and any other statements made pursuant to this or any other agreement with the United States. should be exc luded or suppressed under Federal Rule of Evidence 4 I0, Federal Rule of Criminal Procedure 11 (1), the Sentencing Guidelines or any other provision of the Constitution or federal law. Page 12 of 14 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 13 14 of of 14 15 PageID# PageID# 25 6955 Any alleged breach of this plea agreement by either party shall be determ ined by the Court in an appropriate proceeding at which the defendant's di sclosures and documentary evidence shall be admissible and at which the moving party shall be required to establish a breach of the pica agreement by a preponderance of the evidence. The proceeding established by this paragraph does not apply, however, to the decision o r the Uni ted States whether lo file a motion based on "substantial assistance" as that phrase is used in Federal Rule of Crim ina l Procedure 35(b) and Section 5Kl . 1 of the Sentencing Guidelines and Policy Statements. The defendant agrees that the decision whether to file such a motion rests in the so le discretion of the United States. 19. Nature of this Plea Agreement and Modifications This wri tten plea agreement constitutes the complete plea agreement between the United States, the defendant, and his counsel. The defendant and hi s at1orney acknowledge that no threats, promises, or representations have been made. nor agreements reached, other than those set forth in writing in this plea agreement, to cause him to plead guilty. Any mod ifications of this plea agreement shall be va lid only as set fort h in wri ting in a supplemental or revised plea agreement signed by all parties. Stuart M. Goldberg Acting Deputy Assistant Attorney Genera l Department of Justice, Tax Di vision Dana J. Boente United States Attorney Eastern District of Virginia By .~~~ J\'1ark D. By: Markf.l ~ Senior Litigation Counsel Robert J. Boudreau Trial Attorney Lytl~ Assistant United States Attorney Date : iz(, h..o, ID ?-, - -----f~- -7i--=-- - - - -- Date: Page 13 of 1-t f.,/ci ( -z ~ ( ";?,-v~7 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-TSEDocument Document 314-5 10 Filed Filed 10/26/17 02/15/19 Page Page 14 15 of of 14 15 PageID# PageID# 26 6956 Defendants Signature: I hereby agree that I have consulted wi th my attorney and full y understand all rights with respect to the pending criminal informa tion. r urther, I fully understand all rights with respect to Titl e 18, United States Code, Section 3553 and the provisions of the Sentencing Guidel ines that may apply in my case. l have read this plea agreement and carefully reviewed every part of it with my attorney. I understand this plea agreement and voluntarily agree to it. V~ -li _\t?rz Date: Ovfo~O' 2 6 2-0 j 1 Hyung Kwon Kim Defendant Defense Counsel Si1:mature: I am counsel for the defendant in this case. I have fully explained the defendant's rights to him with respect to the pending in formation. Funher, I have reviewed Title 18, United States Code. Section 3553 and the Sentenci ng Guidelines, and I have fully explained to the defe ndant the provisions that may apply in this case. I have carefully reviewed every part of this plea agreement with the defendant. To my knowledge, the defendant's decision to enter into this agreement is an informed and vo luntary one. u~-+-t--::::-.:, Date: Mark E. Matthews Charles Myungsik Yoon Counsel for the Defendant Page l 4 of l 4 Case Document 314-6 Filed 02/15/19 Page 1 of 14 Page D# 6957 EXHIBIT Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page12ofof13 14PageID# PageID#284 6958 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Alexandria Division UNITED STATES OF AMERICA v. HYUNG KWON KIM, Defendant. ) ) ) ) ) ) ) ) Case No. 1:17-CR-00248 Honorable T. S. Ellis III Sentencing: January 25, 2018 4:00 p.m. POSITION OF THE UNITED STATES WITH RESPECT TO SENTENCING The United States hereby submits its position on the sentencing of the defendant Hyung Kwon Kim (“defendant” or “Kim”) in accordance with U.S.S.G. §6A1.2 and the policy of this Court. As explained below, while the government agrees with the Probation Office’s calculation of the sentencing range the advisory Sentencing Guidelines, the government nevertheless believes that the appropriate Guidelines range that should be applied in this case is that agreed upon by the parties, as set forth in the plea agreement. Taking into account the factors set forth in 18 U.S.C. § 3553(a) and the government’s filing under seal, the government makes a final sentencing recommendation of nine (9) months of imprisonment, three (3) years of supervised release, an appropriate fine, and a $100 special assessment. I. Background A. Offense Conduct Hyung Kim is a highly educated and sophisticated executive. Born into affluence, he had the good fortune to inherit staggering sums. The vast sums Kim secreted in a series of secret Swiss accounts are of import here. At one point, in 2004, the windfall stashed in Switzerland 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page23ofof13 14PageID# PageID#285 6959 swelled to over $28 million. Kim engaged in a series of schemes and ruses to conceal the funds from the IRS, violate reporting requirements, and evade taxes. Kim first opened an account in his own name at Credit Suisse AG in Switzerland in October 1998. He funded that account, as well as other additional accounts that he opened at Credit Suisse, its wholly owned subsidiaries (including Bank Leu, Bank Hofmann, and Clariden Leu), and UBS AG, with funds inherited from a foreign relative. In November 2000, Kim took the first of many steps to mask his ownership and control of the offshore funds. At the advice and with the assistance of his co-conspirator Edgar Paltzer, an attorney practicing in Switzerland, Kim opened an account at Bank Leu in the name of a sham entity called Daroka Overseas. In February 2002, he opened a second account, at Bank Hofmann, in the name of the same entity. By placing his assets in accounts held in the name of a nominee, Kim made it appear that the offshore funds belonged to a corporate entity, not him. Kim controlled the assets in the account by meeting with the bankers and his attorney in in Switzerland and the United States as well as communicating with them via email, fax, and phone. Further, he hosted one of his Swiss bankers at his homes in the U.S. where the banker vacationed with his family and used Kim’s residence as a base to travel to meet with his other clients. Wires from afar flowed into these accounts. By the close of 2004, the balance of his accounts exceeded $28 million. Kim did not expend these funds on necessities. Instead, Kim used assets in the accounts to fund a lavish lifestyle. The Statement of Facts and PSR discuss Kim’s expenditures in detail. However, a summary of the spending is helpful to understand the magnitude of the wealth that Kim concealed: 2 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page34ofof13 14PageID# PageID#286 6960  Between 2003 and 2007, Kim spent over $3 million from his Swiss accounts to purchase his residence in Greenwich, Connecticut. Kim and Paltzer took efforts to conceal that Kim controlled the funds in the Swiss accounts. When Kim communicated with Paltzer, he used coded language. In turn, Paltzer directed Credit Suisse to issue a check for $1.76 million from Credit Suisse First Boston, its U.S. bank, so that it appeared that Kim tapped a domestic source of funds.  In 2005, Kim spent almost $5 million from his Swiss accounts to purchase a summer home on Cape Cod. While the price was significant, what is most relevant are the machinations undertaken by Kim and Paltzer to conceal Kim’s ownership of the Swiss accounts and the summer home itself. Paltzer formed a new sham entity, Edraith Invest & Finance, to hold title to the home as well as a Swiss account. Paltzer and Kim pretended that Kim merely leased the home in an arms-length transaction from a third party. They drafted and executed fake leases. They exchanged emails in which they discussed the wishes of the “owners.”  Between 2003 and 2008, Kim used over $5 million from his Swiss accounts to purchase jewels and jewelry, including the following items: a 11.6 carat diamond ring; a 10.5 carat yellow diamond ring and jewelry setting; a 8.6 carat ruby ring; a 8.4 carat emerald ring; a 7.15 carat diamond ring; and pearls.  Between 2000 and 2008, Kim withdrew over $500,000 when traveling in Switzerland to fund his personal expenses. Kim had the opportunity to bring his remaining assets to the United States in 2008, in the midst of the Department of Justice’s investigation of UBS AG for aiding and assisting U.S. taxpayers to evade their taxes. At that time, Credit Suisse had advised Paltzer and Kim that it 3 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page45ofof13 14PageID# PageID#287 6961 intended to close the Daroka Overseas and Edraith accounts as part of its initiative to minimize the bank’s exposure by closing accounts held by U.S. residents in the names of nominee entities. Fully aware that Kim’s undeclared assets could not stay at Credit Suisse, Paltzer and Kim reviewed Kim’s options: to report his previously undeclared assets and income to the IRS; to end his crimes by spending the assets; or to continue the concealment by transferring his assets to another bank. Kim chose to keep the money offshore, albeit at Bank Frey, a smaller Swiss bank that considered itself immune from U.S. law enforcement as it deliberately maintained no physical presence in the United States.1 With the assistance of Paltzer, Kim opened accounts at Bank Frey in the names of Daroka Overseas and Edraith in December 2008. He deposited into those accounts the remaining assets from his accounts at Credit Suisse’s subsidiaries. Paltzer advised Kim to take further precautions to prevent detection, by limiting emails and phone communications from the U.S. and meeting in third countries, such as France or Italy. Kim maintained the accounts at Bank Frey until 2011. At that time, he elected not to report the funds, but to bring the assets to the United States in a covert manner by paying a 1 In September 2008, as corroborated by the Internet Wayback Machine, Bank Frey’s web site contained the following statements: “An important reason for founding Bank Frey was to provide our clients with the services of a Bank that is - and always will remain - truly Swiss,” Dr. Markus A. Frey says. As a result, Bank Frey follows a strict policy to never open any branch or other representation outside the reach of the Swiss laws and jurisdiction. We strongly believe that only by remaining a true Swiss banking institution, we can guarantee to act in accordance with the Swiss standards of political stability, acting in good faith and an unbroken sense for independent neutrality. Dr. Markus A. Frey continues, “Bank Frey is and will remain truly Swiss. Only that way can we be certain to maintain our values - and assure that no foreign authority will ever 'bully' us into giving them up”. See “A True Swiss Bank”, available at https://web.archive.org/web/20080915012232/http://www.bankfrey.com:80/index.php?option=com content&task=view&id=27&Itemid=55. Bank Frey announced that it would cease operations in October 2013. 4 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page56ofof13 14PageID# PageID#288 6962 jeweler in Switzerland for jewels and jewelry purchased in the United States. Kim arranged the sales by mailing packages of gifts to the children of his former banker. Kim hid handwritten transfer instructions within those packages. Between March and August 2011, Kim spent a total of $3.6 million in two separate transactions to purchase a ring with a sapphire weighing 13.9 carats and three loose diamonds weighing 5.02, 4.03 and 4.17 carats. Kim concealed his offshore assets from his accountants. Indeed, although the defendant filed FBARs in 2005, 2006, 2007, and 2008 (for calendar years 2004 through 2007) on which he reported accounts that he owned in South Korea, he never once reported his Swiss accounts. Further, Kim also filed false income tax returns on which he underreported his income and failed to report his ownership of the Swiss accounts. Kim did not earn substantial amounts of taxable income from the assets in the Swiss accounts. From 2001 through 2010, the combined federal and state income tax loss amounted to $243,542. Indeed, the millions of dollars in capital losses that Kim incurred as a product of his ill-advised investing swamped his investment gains. II. Sentencing Argument Although the Supreme Court rendered the federal Sentencing Guidelines advisory in United States v. Booker, 543 U.S. 220 (2005), “a sentencing court is still required to ‘consult [the] Guidelines and take them into account when sentencing.’” United States v. Clark, 434 F.3d 684, 685 (4th Cir. 2006) (quoting Booker, 543 U.S. at 264). The Supreme Court has directed district courts to “begin all sentencing proceedings by correctly calculating the applicable Guidelines range.” Gall v. United States, 552 U.S. 38, 49 (2007). The sentencing court, however, “may not presume that the Guidelines range is reasonable.” Nelson v. United States, 555 U.S. 350, 352 (2009). The “Guidelines should be the starting point and the initial 5 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page67ofof13 14PageID# PageID#289 6963 benchmark,” but the sentencing court must also “consider all of the § 3553(a) factors” in determining the appropriate sentence. Id.; see also Clark, 434 F.3d at 685. Ultimately, the sentence imposed must meet a standard of reasonableness. See Booker, 543 U.S. at 260-61. A. Guidelines Range 1. The Applicable Guidelines Provisions The defendant pled guilty to the willful failure to file an FBAR, in violation of 31 U.S.C. Sections 5314 and 5322. The offense of conviction in this case falls under U.S.S.G. § 2S1.3. The Probation Office calculated the Guidelines range under U.S.S.G. § 2S1.3(a)(2) (the “Part-S Guidelines”). See Presentence Investigation Report, ¶ ¶ 76-85. That provision includes a crossreference to the theft and fraud Guidelines, and sets the base offense level as follows: 6 plus the number of offense levels from the table in § 2B1.1 (Theft, Property Destruction, and Fraud) corresponding to the value of the funds, if subsection (a)(1) does not apply. Probation calculated the base offense level as 28. Probation added 22 levels as it placed the “value of funds” at $28,151,724, the year-end value of the assets in the unreported accounts in 2004 (the highest year-end balance). See PSR, ¶¶ 65(j), 76; U.S.S.G. § 2B1.1(b)(1)(L) (more than $25 million). The government contends, as does Probation, that two levels should be added as the defendant “committed the offense as part of a pattern of unlawful activity involving more than $100,000 in a 12-month period.” See U.S.S.G. § 2S1.3(b)(2). The Application Note to § 2S1.3 defines a pattern of illegal activity as “at least two separate occasions of unlawful activity involving a total amount of more than $100,000 in a 12-month period, without regard to whether any such occasion occurred during the course of the offense or resulted in a conviction for the conduct that occurred on that occasion.” Kim filed false FBARs on October 14, 2007 (for 2006) and again on March 27, 2008 (for 2008). On each FBAR, Kim failed to report that he owned and 6 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page78ofof13 14PageID# PageID#290 6964 controlled any of the financial accounts in Switzerland. Kim also filed a false 2007 Individual Income Tax Return, Form 1040, on March 3, 2008, which omitted any income that Kim earned from the assets in his undeclared accounts in Switzerland. Kim’s attorneys calculated that Kim omitted $104,699 in ordinary income on the 2007 return. The filing of two false FBARs and a false return within a 12-month period qualifies as a “pattern of unlawful activity” sufficient to trigger the two-level enhancement. While 2S1.3 may be the proper Guideline, the government respectfully requests that the Court sentence the defendant under U.S.S.G. § 2T, the Tax Guidelines. As stated in the Plea Agreement, “at the time that the defendant agreed to plead guilty, the Government consistently took the position with similarly situated defendants that the applicable Guideline was U.S.S.G. § 2T1.1 and § 2T1.4 due to the cross reference in § 2S1.3(c)(1).”2 Plea Agreement, Dkt. # 10, pp. 3-4. In 2012, Kim and the government commenced plea negotiations with the defendant’s counsel. At that time, the government had entered into plea agreements with a number of several other legal permanent residents that required those individuals to plead guilty to FBAR charges, and not tax charges. In each of those cases, the plea agreements specifically set forth a Guidelines calculation using the Tax Guidelines and not § 2S1.3. After Kim and the government had reached an agreement in principle, the government continued to employ the Tax Guidelines in virtually every other FBAR case. In order to ensure that this defendant receives equitable treatment, the government believes that the appropriate Guidelines which should be applied in this case are the alternative calculation under § 2S1.3(c)(1). 2 U.S.S.G. § 2S1.3 states as follows: “If the offense was committed for the purposes of violating the Internal Revenue laws, apply the most appropriate guideline from Chapter Two, Part T (Offenses Involving Taxation) if the resulting offense level is greater than that determined above.” 7 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page89ofof13 14PageID# PageID#291 6965 The base offense level for this offense is 16 pursuant to U.S.S.G. § 2Tl.l(a)(1) and § 2T4.1(F), because the tax loss exceeded $100,000. The base offense level is increased by 2 levels, pursuant to U.S.S.G. § 2T1.1(b)(2), because the offense involved sophisticated means. The defendant should receive a 3-level reduction for acceptance of responsibility resulting in a total offense level of 15. The advisory range is 18 to 24 months of imprisonment and the fine range is $4,000 to $40,000. B. Section 3553(a) Factors 1. Nature and Circumstances of the Offense, History and Characteristics of the Defendant, and the Need for Just Punishment Tax evasion is a serious crime, and the use of offshore accounts by U.S. taxpayers to evade their income tax obligations directly affects the ability of the Treasury to raise funds for government expenditures. In April 2016, the IRS estimated that for the years 2008-2010, the U.S. tax gap, which represented the total amount of U.S. taxes owed but not paid on time, was $458 billion, despite an overall tax compliance rate among American taxpayers of 81.7%. See “Tax Gap Estimates for Tax Years 2008–2010,” report by the IRS, available at: https://www.irs.gov/PUP/newsroom/tax%20gap%20estimates%20for%202008%20through%202 010.pdf. The IRS found that these updated “estimates suggest that compliance is substantially unchanged since last estimated for [tax year] 2006.” Id. at 2. What sets Hyung Kim apart from many other seemingly similarly situated defendants, is the level and duration of the deception he employed to hide his assets from the IRS. For over a dozen years, the defendant employed a series of ever more aggressive schemes to conceal the windfall that he inherited. Kim utilized nine different accounts at five Swiss banks to hide his assets. For four of those accounts, the defendant used nominee entities, formed in Caribbean taxhaven countries, to add a further layer of protection. The defendant and his co-conspirator, 8 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMB Document Document 314-6 26 Filed Filed 01/19/18 02/15/19 Page Page 910ofof1314PageID# PageID#292 6966 Paltzer, used one of those entities, Edraith Invest & Finance, to deceive a realtor and other third parties involved in the purchase of his home on Cape Cod. They went so far as to concoct a ruse whereby Kim and Paltzer exchanged emails wherein they pretended that Kim was renting the home from another family. Kim had numerous opportunities to report his accounts and come into compliance. Each time, he chose to continue his criminal conduct. From 2004 through 2008, Kim filed FBARs on which he reported his ownership of certain accounts in South Korea. In each of those years, he had the opportunity to come clean about his Swiss accounts. He could have informed his U.S. return preparers about the Swiss accounts and sought their advice for properly reporting the ownership of the accounts and the income that he received, and pay the tax due and owing. Kim stayed silent. In the same year that he filed his last, false FBAR, Paltzer, Kim’s Swiss attorney, presented to him the option to close the accounts and bring the money to the United States. Instead, Kim chose to burrow deeper into the darkness of offshore evasion. He moved his assets to a bank that touted itself as refusing to be “bullied” by a “foreign authority,” such as U.S. law enforcement. Kim kept the funds in Switzerland for almost three more years. He continued to conceal his accounts from his return preparer and never filed FBARs during those years. In 2011, Kim again had the option to come clean and report his offshore assets. Instead, he elected to spend down the assets. Through a series of messages hidden in packages mailed from the U.S. to his former banker in Switzerland, Kim arranged to close his account by using the remaining fund to buy yet more high-end jewelry. 9 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page10 11ofof13 14PageID# PageID#293 6967 Given the duration of the offense, the amounts involved, the defendant’s knowledge of his duty to report his foreign financial accounts, and the myriad of schemes and lies that the defendant perpetrated, a sentence of incarceration is required in order to reflect the seriousness of the offense, to promote respect for the law, and to provide just punishment for the offense. 2. The Need for Deterrence Over the past decade, the government endeavored to crack down on the use of foreign financial accounts by U.S. citizens seeking to evade the payment of their taxes. The foreign banks and institutions are more likely to aid and assist the ultra-high net worth individuals, like the defendant, to evade their taxes. Such foreign institutional assistance makes these crimes more difficult to detect, investigate and prosecute. Further, prosecutions involving offshore accounts such as this one require the government to commit significant investigative and prosecutorial resources, and the IRS typically detects the criminal conduct well after the offenses have been committed. A sentence of incarceration and a strong message of general deterrence in this case is necessary to ensure that U.S. taxpayers do not use foreign financial accounts to evade their taxes. The government concedes that the defendant will pay a great financial price for his crimes. He has already remitted over $14 million to the government as a civil penalty for his willful failure to report his foreign banks accounts. Nevertheless, the defendant should receive no mercy for paying over what amounts to slightly more than 7% of his current net worth. He had numerous opportunities to report his accounts, had access to seasoned professionals who knew how to do such reporting, and chose not do so. He has no one to blame but himself. Further, Kim would have owed the same civil penalty had he been audited, not prosecuted. 10 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page11 12ofof13 14PageID# PageID#294 6968 C. Fine The Guidelines instruct that “[t]he court shall impose a fine in all cases, except where the defendant establishes that he is unable to pay and is not likely to become able to pay any fine. U.S.S.G. § 5E1.2(a). The Presentence Report states that Kim’s assets exceed $200 million and he receives monthly cash flow of more than $450,000. As such, the government recommends that the Court impose a substantial fine. III. Restitution Pursuant to 18 U.S.C. § 3663A, restitution is mandatory in this case, and the parties have agreed that the defendant should pay full restitution to the IRS. The government expects that by the time of sentencing the defendant will have filed amended federal and state income tax returns and directly paid over the tax due and owing as well as interest. Nonetheless, the government respectfully requests that the Court order restitution to the IRS for the following years in the following amounts: 2003 – $93,223; and 2009 – $63,828. 11 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page12 13ofof13 14PageID# PageID#295 6969 IV. Conclusion Based on the foregoing, and for the reasons stated in the United States’ sealed filing, the United States submits that a final sentence should be imposed of nine (9) months of imprisonment, three (3) years of supervised release, an appropriate fine, and a $100.00 special assessment. Respectfully submitted, Dana J. Boente United States Attorney By: /s/ Mark D. Lytle Assistant United States Attorney Eastern District of Virginia Counsel for the United States of America United States Attorney’s Office 2100 Jamieson Avenue Alexandria, Virginia 22314 Tel.: (703) 299-3700 Fax: (703) 299-3981 Email: Mark.Lytle@usdoj.gov By: /s/ Mark F. Daly Special Assistant United States Attorney United States Attorney’s Office 2100 Jamieson Avenue Alexandria, Virginia 22314 Tel.: (202) 616-2245 (phone) Fax: (202) 616-1786 (fax) E-mail: Mark.F.Daly@usdoj.gov Robert J. Boudreau Special Assistant United States Attorney United States Attorney’s Office 2100 Jamieson Avenue Alexandria, Virginia 22314 Tel.: (202) 616-3336 (phone) Fax: (202) 514-0962 (fax) E-mail: Robert.J.Boudreau@usdoj.gov 12 16184362 2 Case Case 1:18-cr-00083-TSE 1:17-cr-00248-LMBDocument Document 314-6 26 Filed Filed01/19/18 02/15/19 Page Page13 14ofof13 14PageID# PageID#296 6970 CERTIFICATE OF SERVICE I hereby certify that on the 19th day of January, 2018, I electronically filed the foregoing Position of the United States With Respect to Sentencing with the Clerk of Court using the CM/ECF system which will send notification of such filing to all attorneys of record. A copy has also been sent via email to: Karen Riffle Supervising United States Probation Officer Karen_Riffle@vaep.uscourts.gov /s/ Mark F. Daly Special Assistant United States Attorney 13 16184362 2 Case Document 314-7 Filed 02/15/19 Page 1 of 5 Page D# 6971 EXHIBIT Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-7 Filed 509 02/15/19 Filed 02/13/19 Page 2Page of 5 PageID# 1 of 4 6972 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) ) ) v. ) ) PAUL J. MANAFORT, JR., ) ) Defendant. ) ____________________________________) UNITED STATES OF AMERICA, Crim. Action No. 17-0201-01 (ABJ) ORDER Defendant Paul J. Manafort, Jr. entered a plea of guilty in this case on September 14, 2018. The plea agreement [Dkt. # 422] provides: Your client shall cooperate fully, truthfully, completely, and forthrightly with the Government . . . . Plea Agreement ¶ 8. Defendant agreed in paragraph 8(a) of the agreement to be debriefed; in paragraph 8(c) to testify at any proceedings, and in paragraph 8(f) that he “must at all times give complete, truthful, and accurate information and testimony, and must not commit, or attempt to commit, any further crimes.” Paragraph 8 goes on to provide that defendant “shall testify fully, completely and truthfully before any and all Grand Juries” in the District of Columbia or elsewhere. Paragraph 13 – “Breach of Agreement” provides: Your client understands and agrees that, if after entering this Agreement, [he] fails specifically to perform or to fulfill completely each and every one of [his] obligations under this Agreement, or engages in any criminal activity prior to sentencing or during his cooperation . . . , [he] will have breached this Agreement. Should it be judged by the Government in its sole discretion that the defendant has failed to cooperate fully, has intentionally given false, misleading or incomplete information or testimony, has committed or attempted to commit any further crimes, or has otherwise violated any provision of this agreement, the defendant will not be released from his pleas of guilty but the Government will be released from its obligations under the agreement, including (a) not to oppose 1 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-7 Filed 509 02/15/19 Filed 02/13/19 Page 3Page of 5 PageID# 2 of 4 6973 the downward adjustment [to the U.S. Sentencing Guidelines calculation] for acceptance of responsibility . . . . Your client understands that the Government shall be required to prove a breach of this Agreement only by good faith. The defendant accepted the plea agreement; the signed acceptance on last page states, “I fully understand this Agreement and agree to it without reservation. I do this voluntarily and of my own free will, intending to be legally bound.” After the plea was entered, sentencing was deferred while the defendant’s cooperation was ongoing. On November 26, 2018, the parties informed the Court in a joint status report [Dkt. # 455] that it was the government’s position that the defendant had breached the plea agreement by making false statements to the FBI and Office of Special Counsel (“OSC”) and that it was time to set a sentencing date. The defendant disputed the government’s characterization of the information he had provided and denied that he had breached the agreement, but he agreed that in light of the dispute, it was time to proceed to sentencing. Thereafter, the government was ordered to provide the Court with information concerning the alleged breach, a schedule was established for the defense to respond, and the following submissions were made a part of the record in the case: December 7, 2018 Government’s Submission in Support of its Breach Determination [Dkt. # 461] (Sealed); [Dkt. # 460] (Public) January 8, 2019 Defendant’s Response to the Government’s Submission in Support of its Breach Determination [Dkt. # 470] (Sealed); [Dkt. # 472] (Public) January 15, 2019 FBI Declaration in Support of the Government’s Breach Determination with accompanying exhibits [Dkt # 477] (Sealed); [Dkt. # 476] (Public) January 23, 2019 Defendant’s Reply to the Declaration [Dkt. # 481] (Sealed); [Dkt. # 482] (Public) The Court held a sealed hearing on February 4, 2019, and the parties each filed post-hearing submissions. See Def.’s Post-Hearing Mem. [Dkt. # 502] (Sealed), [Dkt. # 505] (Public); Government’s Suppl. [Dkt. # 507] (Sealed). It is a matter of public record that the Office of Special Counsel has alleged that the defendant made intentionally false statements to the FBI, the OSC, and/or the grand jury in connection with five matters: a payment made by Firm A to a law firm to pay a debt owed to the law firm by defendant Manafort; co-defendant Konstantin Kilimnik’s role in the obstruction of justice conspiracy; the defendant’s interactions and communications with Kilimnik; another Department of Justice investigation; and the defendant’s contacts with the current administration after the election. The parties are agreed that it is the government’s burden to show that there has been a breach of the plea agreement, but to be relieved of its obligations under the agreement, it must simply demonstrate that its determination was made in good faith. Plea Agreement ¶ 13. 2 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-7 Filed 509 02/15/19 Filed 02/13/19 Page 4Page of 5 PageID# 3 of 4 6974 In its January 8, 2019 response to the breach allegations, the defense stated that “given the highly deferential standard that applies to the Government’s determination,” Def.’s Resp. [Dkt. # 472] at 2, it was not challenging the assertion that the determination was made in good faith. And, in response to a question posed by the Court at a status hearing held on January 25, 2019, the defendant conceded that that the determination was made in good faith. Tr. of Hearing (Jan. 25, 2019) [Dkt. # 500] at 13. In light of the defendant’s concession, and based upon the Court’s independent review of entire record, including: all of the pleadings listed above and the supporting exhibits; the facts and arguments placed on the record at the hearing held on February 4, 2019; and the post-hearing submissions, the Court ruled at the hearing held on February 13, 2019 that the Office of Special Counsel made its determination that the defendant made false statements and thereby breached the plea agreement in good faith. Therefore, the Office of Special Counsel is no longer bound by its obligations under the plea agreement, including its promise to support a reduction of the offense level in the calculation of the U.S. Sentencing Guidelines for acceptance of responsibility. But that is not the only question before the Court to decide. The question remains whether the defendant made intentionally false statements in connection with the five matters that have been identified by the Office of Special Counsel. The answer bears upon the applicability of certain provisions of the Sentencing Guidelines, in particular, the adjustment for acceptance of responsibility, and it bears more generally on the Court’s assessment of the factors set forth in the sentencing statute, 18 U.S.C. § 3553(a). The parties are agreed that the government is bound to prove facts that bear on the application of the Guidelines by a preponderance of the evidence. Based upon its consideration of the entire record and the arguments of counsel at the hearing of February 4, 2019, for the reasons stated on the record at the continuation of the sealed hearing on February 13, 2019, the Court made the following additional findings: I. OSC has established by a preponderance of the evidence that defendant intentionally made false statements to the FBI, the OSC, and the grand jury concerning the payment by Firm A to the law firm, a matter that was material to the investigation. See United States v. Moore, 612 F.3d 698, 701 (D.C. Cir. 2010). II. OSC has failed to establish by a preponderance of the evidence that on October 16, 2018, defendant intentionally made false statements concerning Kilimnik’s role in the obstruction of justice conspiracy. III. OSC has established by a preponderance of the evidence that the defendant intentionally made multiple false statements to the FBI, the OSC, and the grand jury concerning matters that were material to the investigation: his interactions and communications with Kilimnik. IV. OSC has established by a preponderance of the evidence that on October 5, 2018, the defendant intentionally made false statements that were material to another DOJ investigation. 3 Case 1:18-cr-00083-TSE Case 1:17-cr-00201-ABJ Document Document 314-7 Filed 509 02/15/19 Filed 02/13/19 Page 5Page of 5 PageID# 4 of 4 6975 V. OSC has failed to establish by a preponderance of the evidence that on October 16, 2018, defendant intentionally made a false statement concerning his contacts with the administration. This order does not address the question of whether the defendant will receive credit for his acceptance of responsibility in connection with the calculation of the Sentencing Guidelines or how any other Guideline provision will apply to this case. Those issues, which depend on the consideration of a number of additional factors, will be determined at sentencing, after the Presentence Investigation Report has been completed, the parties have filed their memoranda in aid of sentencing, and the Court has heard argument. The Court reporter is hereby ORDERED to provide a copy of the sealed transcript of today’s hearing to the parties by 12:00 noon on February 14, 2019, and the parties must inform the Court of any redactions that must to be made before the transcript can be released no later than 11:00 a.m. on February 15, 2019. SO ORDERED. AMY BERMAN JACKSON United States District Judge DATE: February 13, 2019 4