Did Trump Borrow Money From Russian Banks
Donald Trump used to bank with the large guns. Now he's borrowing from Axos Fiscal, an obscure, internet-only institution based in San Diego and Las Vegas.
In mid-February, Axos refinanced a $100 million Trump Tower mortgage due in September, a New York Metropolis Finance Section document shows. The new loan was made but days afterwards The Trump Organization'southward auditor resigned, maxim that 10 years of the company's fiscal statements could not be relied upon.
In lending to The Trump Arrangement, Axos is stepping upward when other banks have balked. But this is not unheard-of for Axos. An exam of legal filings, internal documents and land records shows Axos has a history of treatment singular loans.
Axos has teamed upwards with nonbank lenders on loans to small businesses that carried cripplingly high double- and triple-digit effective annual interest rates, loan documents show. The bank has also specialized in loans to foreign nationals, internal documents and its website land, and has offered a type of loan that allows borrowers who paid cash for a holding to turn effectually and instantly have coin out. Such loans may pose money laundering risks, banking analysts say.
The banking concern has besides been sued by two former employees who say they were wrongfully fired after they raised questions about its practices. On March 21, Jennifer Brear Brinker, hired in 2018 to review the banking concern's loan portfolios for its Governance, Risk Management and Compliance Department, filed conform against Axos in federal courtroom in California.
Brinker accused the banking company of intentionally understaffing its compliance section "in an effort to conceal its failure to comply with federal cyberbanking regulations" and contends she was terminated in January 2021 while completing a study highlighting deficiencies at Axos including "pregnant issues in the bank'south anti-money laundering practices."
A spokesman for Axos, who asked not to be identified, said the bank disputes Brinker'due south allegations "and her perception of the underlying factual circumstances." Axos intends to defend against the lawsuit vigorously, the spokesman added.
A lawyer representing Brinker declined to comment further on her case simply said they both look forrard to proving her claims in court.
Later on this month, Axos is scheduled to face a former internal accountant in a wrongful termination case in California federal courtroom. That auditor, Charles Matthew Erhart, 35, was fired by Axos after he raised concerns about its practices, his 2015 lawsuit says. Among other practices alleged by Erhart — Axos allegedly failed to advise regulators of substantial and risky loans to dubious borrowers, did not disclose to regulators that it had received thousand jury and other subpoenas, improperly denied that it held documents responsive to a Securities and Exchange Committee amendment and instructed employees not to communicate with regulatory officials.
The bank's spokesman said it denies every one of Erhart's allegations. "All were investigated, both internally by Axos's inspect committee and independent counsel, and externally by government regulators and outside auditors," the argument said. "None of the investigations or audits found any merit in Erhart'south allegations."
'Cash-recapture loans'
Axos was founded in 2000 equally Depository financial institution of Net U.s., or BofI, a digital enterprise with no brick-and-mortar branches; it changed its name to Axos in 2018. Its shares trade on the New York Stock Substitution.
With $15.5 billion in assets at the finish of 2021, Axos is a relatively pocket-size, federally chartered savings institution. J.P. Morgan Chase, past comparison, holds over $three trillion in avails. Some $12.6 billion of Axos' assets are loans, including residential mortgages and loans on commercial real estate and multi-family dwellings, SEC filings evidence.
Axos is overseen by Gregory Garrabrants, a lawyer, sometime Goldman Sachs broker and McKinsey & Co. consultant. Before joining Axos in October 2007, Garrabrants was an executive at Indymac, a huge California savings & loan that collapsed in July 2008 under a mountain of toxic mortgages, co-ordinate to bank regulators. Indymac was one of the nation's biggest bank failures, costing the FDIC fund more than than $x billion, a regime investigator estimated.
Axos has been a fast grower and has turned in a torrid stock performance in recent years. In 2018, Garrabrants earned $27 million, just 10 percent less than the $30 one thousand thousand received by Jamie Dimon, the chief executive of JPMorgan Chase.
In lending to the Trump Organization, Axos is forging ties with a borrower that has proved troublesome for other banks over the years, with multiple bankruptcies more than a decade ago and many lawsuits.
Axos declined to comment about the terms of the loan and the Trump Organisation'due south spokeswoman did not answer to an email seeking annotate from NBC News. But Eric Trump told CNN in a statement that "Trump Tower is one of the virtually iconic properties in the world and sits on arguably the almost prestigious corner in all of New York. We accept incredibly depression debt, take a tremendous corporeality of cash and take an extremely profitable company. Nosotros had no trouble refinancing."
In September, Forbes valued the commercial role and retail space bankroll the $100 million Trump Tower mortgage Axos refinanced at $285 million; Gucci is a retail tenant on the ground floor, paying an estimated $24 million a year.
The $100 million Trump Tower mortgage represents a large loan for a bank the size of Axos. As a savings association, Axos is bailiwick to limits on loans to one borrower based on a measure of its uppercase. On June 30, 2021, that limit was $203.8 million, the bank's filings show, and its largest outstanding loan balance was $145 one thousand thousand.
For fiscal year 2021, Axos held $3.2 billion in commercial real manor loans, or 27.5 percent of its total loans. About were on properties in California, its regulatory filings show. The new Trump Tower financing increases Axos' lending in New York state by almost 30 percent, based on its December 2021 holdings.
Axos held $4.four billion in single-family mortgages in 2021 or 38 percent of its loans held for investment.
In her lawsuit, quondam employee Brinker alleged that in 2020 Axos tried to conceal problems with home loans fabricated to borrowers by A & D Mortgage, a Hollywood, Fla.-based nonbank mortgage lender financed by Axos. The bank failed to tell its lath or its investors the loans had become issues, Brinker alleged. A&D Mortgage was funded by an Axos credit line for v years, from April 2016 to April 2021, Compatible Commercial Code filings show.
A&D would sell the mortgages information technology had underwritten using Axos's line of credit into a pool of loans packaged and issued by a related entity known as Imperial Fund Capital Partners. But when Covid struck, investors refused to buy the security and the loans remained as collateral backing Axos's credit line for longer than the 60 days the depository financial institution'southward policy allowed, co-ordinate to Brinker'south lawsuit.
A&D Mortgage is headed past Maksim Slyusarchuk, according to Florida corporate records, who described himself in a 2013 lawsuit he filed in Miami-Dade County every bit "an international businessman with experience in the Russian markets and in international finance."
Slyusarchuk also owns 50 percent of Imperial Fund Capital letter, an SEC registered investment adviser with $316 million under management; information technology pools mortgages into securities and sells them to investors. Equally of the date of publication of this commodity, April 7, UCC filings showed that one of its units, Royal Fund 2 LLC, was financed by Sovcombank, Russia's ninth largest depository financial institution. Sovcombank was sanctioned by the U.Southward. Treasury on Feb. 24.
Neither A&D Mortgage, Majestic Fund nor Slyusarchuk responded to an email bulletin seeking comment prior to publication of this article.
Following publication, a spokesman for A&D Mortgage told NBC News that during the financial turmoil of the early Covid menstruation, loan adjustments like those referenced in the Brinker complaint were commonplace. He also said that A&D had exited its financial association with Axos Banking company in practiced continuing in 2020 and that information technology has had no ties to the bank since. Finally, the spokesman added that Imperial Fund II exited its financial human relationship with Sovcombank on February. 22. Still, a UCC filing stating that Sovcombank terminated its fiscal relationship with Purple Fund was made on April 13.
On its website, Axos says it has extensive experience in mortgage lending to "nonresident aliens" and offers loans of up to $20 meg accompanied by 50 per centum down payments. A 2014 investor presentation noted that the depository financial institution specialized in lending to Chinese nationals, for example, who do not have tax returns that they can present to document their financial standing.
Axos has also fabricated loans to Russian nationals; asked well-nigh the risk of such lending given the Ukraine invasion, the Axos spokesman said they correspond a fraction of ane percentage of Axos' loans. "All such loans were washed at low loan-to-value ratios and are well secured," he added.
The 2014 Axos investor presentation also shows the banking concern offered and so-called cash recapture loans, made to individuals paying cash in full for a property who want "to recoup some of their investment." The bank required no waiting period to cash out, the presentation noted, simply said the source of the initial purchase funds "must be sourced/seasoned." Depository financial institution analysts say such loans may enhance the run a risk of money laundering.
The Axos spokesman said the depository financial institution conducts "a total, know-your-client investigation" of each cash-recapture loan applicant. The loans are "field of study to strict underwriting and program qualification parameters," he said, "designed to ensure total compliance with Anti-Money Laundering and Bank Secrecy Act laws and all other legal or regulatory requirements."
Axos has too teamed up with some aggressive non-banking concern lenders charging heaven-high involvement rates to small-scale concern borrowers, NBC News has previously reported. The bank conducted some of these arrangements through its unit of measurement in Nevada, a state with no interest rate limits, assuasive downstream lenders to evade state usury caps on loans they made to borrowers operating in more restrictive jurisdictions. Predatory lending experts call these arrangements "hire-a-bank schemes," and they were permitted under a Trump-era banking dominion. Concluding year, President Joe Biden signed a resolution rescinding the rule.
Axos disputed that this business involved "rent-a-banks" and said its operation was "a bank sponsorship program, operated and so as to be fully compliant with legal and regulatory requirements, through which it entered into agreements with several third-party service providers." All but i of these programs accept been wound down, the spokesman added.
Articulation interest agreement
In contempo years, Axos has aggressively pursued bearding bloggers who posted critical analyses of the banking concern'due south activities on investing websites, court documents evidence. In 2017, Axos joined forces with tiptop executives at MiMedx Group, a formerly high-flight maker of skin grafts, to identify anonymous critics of the companies. Axos and MiMedx entered into a "joint interest understanding" to investigate the critics, courtroom documents and internal emails prove.
Two of the superlative MiMedx executives with whom Axos pursued the joint interest agreement — one-time main executive Parker Petit and former COO William Taylor — were bedevilled of fraud in 2021 and sentenced to jail in a case unrelated to Axos. Much of what had been alleged about MiMedx past the critics it targeted turned out to exist accurate, the criminal instance showed.
A spokeswoman for MiMedx said the company does not annotate on legal matters but noted that its "senior leadership team and board of directors are entirely new since 2019."
Regarding its arrangement with the convicted erstwhile MiMedx executives, the Axos spokesman said that when it struck the agreement with Petit and Taylor, Axos needed to communicate with MiMedx about the activities of investors who had bet confronting both companies and publicized those bets. He added that "the truth of allegations against MiMedx was unknown and the company and its executives appeared to savor a favorable reputation."
The Erhart case
Later this month, the 2015 wrongful termination case filed by Erhart, the former Axos auditor, is scheduled to go to trial. Erhart'southward lawyer, Ballad Gillam, declined to comment on the case.
Erhart began working at Bank of Internet, as Axos was known at the time, in Sept. 2013, documents show. Previously an examiner at the Financial Industry Regulatory Authority, he'd led an examination that identified a banker who allegedly stole $4.2 one thousand thousand from his customers, his lawyer said.
A native of rural Kansas who put himself through the Academy of Kansas working on an associates line and a road structure crew, Erhart began identifying issues presently after he was hired at Axos, according to his complaint. He says he expressed concerns about concentration risk at the banking company, for example, noting to superiors that just nine of its customers accounted for 40 percent of its total deposits. Erhart alleges that he was brash by his boss'due south superior not to put that data in an email.
Some of Erhart'due south allegations virtually Axos's practices had to practice with the Banking concern Secrecy Act, which aims to curtail and detect money laundering and loans to what banking regulators phone call "politically exposed persons." They are people who, considering of their public positions or relationships, "may present a risk higher than other customers by having access to funds that may be the proceeds of corruption or other illicit action."
Banks are supposed to collect information about customers' risk profiles to monitor and decide whether a customer's cyberbanking activities are suspicious. Erhart contended in his lawsuit the bank made material alterations of "numerous reports" required under the Banking company Secrecy Deed's quality control rules and did not disembalm substantial loans to criminals and politically exposed persons. In early 2015, Erhart's complaint says, he uncovered data about borrowers who exposed the bank to reputation adventure, including "very loftier level strange officials from major oil-producing countries and war zones." He did non identify specific borrowers in the complaint.
In March 2015, Erhart turned over bank records to Axos'southward primary regulator, the Treasury Department's Role of the Comptroller of the Currency, his complaint said. He emailed the data he had compiled to his female parent for safekeeping. He was fired in June 2015.
The OCC has not taken regulatory action against the bank. Erhart now works as a partner at a cryptocurrency consulting house.
"In the years since Erhart get-go made his allegations," the banking concern's spokesman said, "Axos has suffered no agin business organisation upshot, no restatement, no fasten in reserves, no loss of a major contract, no material weakness disclosure, no earnings miss. Independent auditors and authorities regulators — all with full knowledge of all Erhart's allegations — have consistently issued make clean audit opinions, passed examinations, and granted farther regulatory approvals for more than seven full years."
Asked to supply copies of the clean audit opinions and examinations, Axos declined, saying they are confidential.
The company did supply a copy of a 2017 alphabetic character from the Securities and Exchange Committee maxim information technology had closed an investigation into Axos and did not intend to recommend an enforcement action against the bank. Still, the SEC said its letter "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation."
In a split up civil instance in 2017, Garrabrants sued Erhart alleging that he had stolen hisconfidential data. The banking concern as well sued Erhart's mother in Kansas, to whom the quondam auditor had sent information nearly the bank'due south activities for backup. Axos settled the instance against Erhart'south mother; it declined to state the terms.
Garrabrants' case against Erhart went to trial concluding fall. The jury plant that Erhart had violated California police "in connection with theft of Garrabrants' personal, confidential, and financial information," the depository financial institution'south spokesman said.
Gillam, Erhart's lawyer, provided a statement on this suit. "The documents Mr. Erhart accessed that related to Mr. Garrabrants were in bank files he institute in the course of doing his piece of work as an internal auditor," she said. "They were only used to support Mr. Erhart's allegations of wrongdoing that he presented to the bank's principal regulator, the Function of the Comptroller of the Currency."
The jury "rejected Garrabrants' claim of intentional infliction of emotional distress and awarded him $1,500 on an invasion of privacy claim," Gillam added. On an anti-hacking allegation, the jury awarded $1 to Garrabrants, an amount he had requested.
Erhart is appealing that verdict, Gillam said.
In late February, Axos also entered into a settlement agreement with a Houston Municipal pension fund that had sued the bank in 2015. That matter, which became a course action, alleged securities fraud largely based on Erhart's allegations.
The terms of the settlement take not still been made public. When asked why the bank was settling now, its spokesman said: "While Axos continues to believe that information technology would have prevailed at trial, this settlement allows Axos to avoid the distraction and continued expense of litigation."
Source: https://www.nbcnews.com/politics/donald-trump/trump-organization-used-borrow-major-banks-now-look-lending-money-rcna22068
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