Although the big news is the allegation of corruption in how Bob McDonnell tried to promote Star Scientific and Anatabloc, I have been thinking all along that the “sleeper” charges are Counts 12, 13 and 14. Counts 12 and 13 deal with allegations that the McDonnells made knowingly false statements on financial statements that accompanied applications for refinancing their MoBo Realty LLC rental homes. It often happens that when the federal government starts subpoenaing everything you own and going over it with a fine-toothed comb, little discrepancies are found.
Count 12 alleges that on October 3, 2012, Bob McDonnell made a knowingly false statement when, “as part of required paperwork for a loan on one of the MoBo Virginia Beach properties,” he failed to list $120,000 in loans from Jonnie Williams.
Count 13 alleges that on February 1, 2013, both Bob and Maureen transmitted a signed Uniform Residential Loan Application to a bank in an effort to refinance four loans, including loans on the two MoBo Virginia Beach properties, and that the application did not list loans from Jonnie Williams or the Star Scientific stock that Maureen had bought. Two weeks later, Maureen was interviewed by the Virginia State Police, and then three days later Bob sent a fax to the loan officers that added the loans from Jonnie, the Star Scientific stock, and a few other items such as a car that had been left off the first document.
The defense responded with three themes, developed on cross examination of the government witnesses:
- with testimony that there are often errors and omissions in initial applications, and that getting a letter or memo from the applicant some days later is not terribly unusual;
- with testimony that if the loan was never put in writing, it might not get included just because people don’t think about it in the same way (remember, the issue is whether Bob and Maureen were trying to defraud, not whether the application was technically perfectly correct); and
- with testimony that loans made to a separate entity such as MoBo Realty LLC, unless accompanied by personal guarantees from the owners, don’t really have to be listed on a personal financial statement.
If the indictment is correct that the documents submitted were personal financial statements (unfortunately, the news reports aren’t clear enough on a technical point), the loans to the LLC would not have to be separated out; it would be sufficient if the net worth of the LLC was reasonably accurately disclosed.
Loan underwriters take statements of the value of closely-held LLCs as being presumptively fictional; they will usually ask for copies of the LLC tax returns so that they can look for themselves. And it seems unlikely that Bob or Maureen would have been submitting detailed financials on MoBo Realty, because the managers of that LLC were Bob’s sister and her ex-husband. The charges may not get thrown out by the judge, but the jury may not be very impressed with the prosecution’s proof of intent.
The final witness Wednesday was FBI Agent David Husler, who testified that the FBI interviewed more than 300 witnesses and collected and examined over 3.5 million pages of documents. This double-edged testimony is important to the prosecution because they like to show how diligent they have been, how thorough and fair their investigation was, etc. The defense counter will be, “300 witnesses, and no one who can say that there was a quid pro quo? 3.5 million documents and you didn’t find anything that showed that the Governor actually DID something in return for the loans?”
It appears that the prosecution will wrap up Thursday, and the jury will get the rest of the week off while the lawyers argue motions to dismiss. The defense is expected to begin its evidence on Monday.