Steve Bannon and Three Defendants Indicted for $25 Million “We Build The Wall” Fraud Scheme
In a surprise indictment, the US Attorney’s Office for the Southern District of New York announced that Steve Bannon, Brian Kolfage, Andrew Badolato and Timothy Shea were indicted for defrauding hundreds of thousands of donors in response to the “We Build The Wall” online fundraising campaign. The indictment charges the defendants in defrauding donors from more than $25 million.
As charged, the defendants defrauded hundreds of thousands of donors under the false pretense that all the money would be spent on the construction of the border wall between Mexico and the United States.
All four defendants were charged with conspiracy to commit wire fraud, and conspiracy to engage in money laundering. In an ironic twist (you cannot make this up), the case was investigated by the United States Postal Inspection Services, and the defendants were arrested by USPIS agents.
Kolfage, a disabled war veteran, was the founder and public face of We Build The Wall, and repeatedly assured donors would not be paid a penny. Notwithstanding this reassurance, the defendants secretly schemed to funnel hundreds of thousands of dollars to Kolfage, which he used to pay for his lavish lifestyle. To hide the scheme, the defendants not only lied to donors, they created sham invoices and accounts to launder donations and cover up the financial transaction trail.
The scheme was launched in December 2018 when the defendants launched a website for an online crowdfunding campaign, We Build The Wall. According to statements on the crowdfunding webpage, the campaign was raising funds to donate to the federal government for construction of a wall on the southern border of the United States. The website included an assurance that “100 % of your donations” would be given to the government for the construction of a wall, and if the campaign could not attain its goal, it would “refund every single penny.”
Kolfage is quoted as repeatedly and falsely stating to 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.” Bannon was quoted on numerous occasions as stating “we’re a volunteer organization.”
The “We Build The Wall” online campaign was an instant success. Within the first week, the site raised $17 million. Based on this success, the campaign drew scrutiny, including questions concerning Kolfage’s background and the plan to give the money to the federal government.
Later in December 2018, the crowdfunding website suspended the campaign, which by that time had raised $20 million. The website operator warned Kolfage that unless he identified a legitimate non-profit organization into which those funds could be transferred, the website would return the funds to the donors.
Kolfage enlisted Bannon and Badolato to lead the campaign. Bannon and Badolato already maintained and operated a non-profit organization to promote economic nationalism and American sovereignty. Bannon and Badolato took control of the fundraising organization and day-to-day activities, including its finances, messaging, donor outreach and operations. They created a new non-profit organization, We Build the Wall Inc., to which they proposed to transfer the money raised on the crowdfunding website., and resume operation of the fundraising activities with a modified purpose – to fund the private construction of a wall along the southern border. They also announced that donors would need to “opt in” to transfer their previous donations to the new We Build the Wall, and in effect “re-raise” the $20 million previously donated.
Starting in 2019, the defendants mislead donors and the crowdfunding website. promising them that “100 percent” of the funds would be used for construction of a wall and that Kolfage would not take a salary or compensation from the new organization.
These false representations were made in solicitations, public statements, social media posts and press appearances by Kolfage and Bannon, and others acting at their direction. In fact, Kolfage issued statements that were false and misleading and reviewed and approved by Bannon and Botolato.
To reinforce these false representations, the defendants adopted bylaws for the non-profit organization that contained false representations that none of the defendants could or would receive any compensation from the funds raised. The defendants also promoted communications that none of the Advisory Board members, which was chaired by Bannon, would receive any compensation for their services. Bannon publicly stated that he and other principals were volunteers.
Bannon and Botalato text each other that the false public statements were important to drive donations and since it “removes all taint of self-interest.”
The false representations were important to many donors and repeated to reassure donors.
All four of the defendants worked together to misappropriate hundreds of thousands of dollars for their personal use. Kolfage took more than $350,000 for personal use, including home renovations, payments for a boat, a luxury SUV, a golf cart, jewelry, cosmetic surgery, personal tax payments and credit card debt. Bannon received over $1 million from We Build The Wall through a non-profit organization under his control, which he used for personal purposes.
The four defendants employed a scheme to route payments from We Build The Wall to Kolfage through Bannon’s non-profit organization and a shell company under Shea’s control. The defendants prepared fake invoices and sham “vendor” arrangements to ensure that the pay arrangement as Kolfage noted in a text message to Badolato remained “confidential” and kept on a “need to know” basis.
Kolfage specifically requested that a specific payment be routed to his spouse. Subsequently a false 1099 was issued to his spouse and listed the services provided as “media.”
In October 2019, the defendants learned they may be under criminal investigation. They switched to encrypted text messaging, revised the website to remove the representation that Kolfage would not be compensated and added a statement that Kolfage would receive a salary beginning in January 2020.