Former White House chief strategist Steve Bannon was arrested Thursday after being charged with defrauding hundreds of thousands of donors through his "We Build the Wall" fundraising campaign.
Bannon pleaded not guilty during a court hearing later Thursday, and he was expected to be released, according to NBC News. Bannon is getting a $5 million bond that is secured by $1.75 million in cash or property that Bannon has to post by Sept. 3. He is not allowed to use private jets or yachts, and he must surrender his passport. His travel will be limited to Connecticut and the New York and Washington, D.C., areas.
Bannon and three associates were indicted in a federal investigation in the Southern District of New York. Prosecutors allege the four defrauded donors by raising "more than $25 million to build a wall along the southern border of the United States," but some of that money was used for personal gain.
The United States Postal Inspection Service assisted in the investigation.
Others in the indictment are Timothy Shea, a 49-year-old from Colorado accused of owning a shell company, Brian Kolfage, a disabled Iraq war veteran, and Andrew Badolato, who according to his own website was a contributor to Breitbart News, the conservative publication Bannon used to run.
The campaign was intended to raise money to help President Donald Trump fulfill a campaign promise to build a border wall. Instead, prosecutors allege that Bannon and his team profited off the arrangement.
The indictment said the defendants "collectively received hundreds of thousands of dollars in donor funds from 'We Build the Wall,' which they each used in a manner inconsistent with the organization's public representations."
"The defendants defrauded hundreds of thousands of donors, capitalizing on their interest in funding a border wall to raise millions of dollars, under the false pretense that all of that money would be spent on construction," Acting U.S. Attorney Audrey Strauss said in a statement. "While repeatedly assuring donors that Brian Kolfage, the founder and public face of We Build the Wall, would not be paid a cent, the defendants secretly schemed to pass hundreds of thousands of dollars to Kolfage, which he used to fund his lavish lifestyle. We thank the USPIS for their partnership in investigating this case, and we remain dedicated to rooting out and prosecuting fraud wherever we find it."
The White House declined to comment. A spokeswoman for Bannon did not return a request for comment.
Kolfage, a 37-year-old triple amputee, launched the crowdfunding campaign in late 2018 on GoFundMe to build the wall. His effort came amid a stalemate over government funding on Capitol Hill, where Trump demanded that any spending package include billions of dollars to go toward the border barrier. The deadlock culminated in the longest partial government shutdown in U.S. history.
Kolfage's effort quickly went viral and raised millions of dollars from hundreds of thousands of donors – but GoFundMe threatened to suspend the campaign unless he "identified a legitimate non-profit organization into which those funds could be transferred," according to the indictment.
Prior to his campaign to crowdfund the border wall, Kolfage had been involved in a string of far-right news blogs and groups, one of which had been scrubbed from Facebook for allegedly using fake accounts to drive up website traffic. Some of the sites peddled false conspiracy theories and racist content. As his wall-funding campaign gained national attention, Kolfage had frequently appeared on Fox News and Fox Business, where he defended Trump and slammed his critics for suffering from "Trump Derangement Syndrome."
Badolato notes on his own website that he has been an "infrequent freelance contributor in the past to Breitbart News," a conservative news outlet Bannon used to run. Badolato also says on his site that he was involved with a number of other conservative publications linked to Bannon including Clinton Cash and The Undefeated: The Rise of Sarah Palin.
Shea, according to an NBC TV station in Colorado, is married to the group's treasurer, Amanda. She told the station that she and her husband opened a P.O. Box in order for donors to send checks. Amanda Shea insisted to NBC, in late 2018, that the checks were being made to Kolfage of "We Build the Wall."
Kris Kobach, a former Republican nominee for a Kansas Senate seat and a team member of "We Build the Wall," previously told the New York Times that Trump gave his "blessing" for the project. Kobach was not mentioned in the indictment.
A year after that story was published, Trump said he disagreed with the move by a "private group" to create a section of the wall "which raised money by ads," he said in a tweet.
The White House press secretary said in a statement that Trump had no involvement the project while distancing the administration from Bannon and the group.
"President Trump has not been involved with Steve Bannon since the campaign and the early part of the Administration, and he does not know the people involved with this project," Kayleigh McEnany said in a statement.
Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Field Office of the United States Postal Inspection Service ("USPIS"), announced the unsealing of an indictment charging BRIAN KOLFAGE, STEPHEN BANNON, ANDREW BADOLATO, and TIMOTHY SHEA for their roles in defrauding hundreds of thousands of donors in connection with an online crowdfunding campaign known as "We Build the Wall" that raised more than $25 million. The defendants were arrested this morning. KOLFAGE will be presented today before U.S. Magistrate Judge Hope T. Cannon in the Northern District of Florida. BANNON will be presented today in the Southern District of New York. BADOLATO will be presented today before U.S. Magistrate Judge Thomas Wilson in the Middle District of Florida. SHEA will be presented today before U.S. Magistrate Judge Kristen L. Mix in the District of Colorado. The case is assigned to U.S. District Judge Analisa Torres in the Southern District of New York.
Acting U.S. Attorney Audrey Strauss said: "As alleged, the defendants defrauded hundreds of thousands of donors, capitalizing on their interest in funding a border wall to raise millions of dollars, under the false pretense that all of that money would be spent on construction. While repeatedly assuring donors that Brian Kolfage, the founder and public face of We Build the Wall, would not be paid a cent, the defendants secretly schemed to pass hundreds of thousands of dollars to Kolfage, which he used to fund his lavish lifestyle. We thank the USPIS for their partnership in investigating this case, and we remain dedicated to rooting out and prosecuting fraud wherever we find it."
Inspector-in-Charge Philip R. Bartlett said: "The defendants allegedly engaged in fraud when they misrepresented the true use of donated funds. As alleged, not only did they lie to donors, they schemed to hide their misappropriation of funds by creating sham invoices and accounts to launder donations and cover up their crimes, showing no regard for the law or the truth. This case should serve as a warning to other fraudsters that no one is above the law, not even a disabled war veteran or a millionaire political strategist."
According to the Indictment unsealed today in Manhattan federal court:
Starting in approximately December 2018, BRIAN KOLFAGE, STEPHEN BANNON, ANDREW BADOLATO, and TIMOTHY SHEA, and others, orchestrated a scheme to defraud hundreds of thousands of donors, including donors in the Southern District of New York, in connection with an online crowdfunding campaign ultimately known as "We Build The Wall" that raised more than $25 million to build a wall along the southern border of the United States. In particular, to induce donors to donate to the campaign, KOLFAGE repeatedly and falsely assured the public that he would "not take a penny in salary or compensation" and that "100% of the funds raised . . . will be used in the execution of our mission and purpose" because, as BANNON publicly stated, "we're a volunteer organization."
Those representations were false. In truth, KOLFAGE, BANNON, BADOLATO, and SHEA received hundreds of thousands of dollars in donor funds from We Build the Wall, which they each used in a manner inconsistent with the organization's public representations. In particular, KOLFAGE covertly took for his personal use more than $350,000 in funds that donors had given to We Build the Wall, while BANNON, through a non-profit organization under his control ("Non-Profit-1"), received over $1 million from We Build the Wall, at least some of which BANNON used to cover hundreds of thousands of dollars in BANNON's personal expenses. To conceal the payments to KOLFAGE from We Build the Wall, KOLFAGE, BANNON, BADOLATO, and SHEA devised a scheme to route those payments from We Build the Wall to KOLFAGE indirectly through Non-Profit-1 and a shell company under SHEA's control, among other avenues. They did so by using fake invoices and sham "vendor" arrangements, among other ways, to ensure, as KOLFAGE noted in a text message to BADOLATO, that his pay arrangement remained "confidential" and kept on a "need to know" basis.
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KOLFAGE, 38, of Miramar Beach, Florida, BANNON, 66, of Washington, D.C., BADOLATO, 56, of Sarasota, Florida, and SHEA, 49, of Castle Rock, Colorado, are each charged with one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering, each of which carries a maximum penalty of 20 years in prison.
The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants would be determined by the judge.
Ms. Strauss praised the outstanding investigative work of the USPIS and the Special Agents of the United States Attorney's Office for the Southern District of New York. She also thanked the U.S Attorney's Office for the Northern District of Florida for their assistance.
The case is being handled by the Office's Public Corruption Unit. Assistant United States Attorneys Nicolas Roos, Alison G. Moe, and Robert B. Sobelman are in charge of the prosecution.
The charges contained in the Indictment are merely accusations. The defendants are presumed innocent unless and until proven guilty.
CNBC's Kevin Breuninger contributed to this story.
Correction: This story was updated to correctly identify defendant Timothy Shea, 49, of Colorado, not Timothy Shea, who in May was announced as the acting administrator of Drug Enforcement Administration.
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