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Crowdfunders of Border Wall Lose Ground at 2nd Circuit

The appeals court cast a wary eye on a nonprofit that collected private funds to stand up a fence on America's southern border and whose high-profile leaders — Steve Bannon included — were indicted for fraud.

(CN) — A right-wing activist fighting to unfreeze funds collected by the scandal-tinged nonprofit We Build the Wall to crowdfund a fence on the U.S.-Mexico border made little headway in that effort Tuesday at the Second Circuit.

We Build the Wall was spearheaded by Air Force veteran Brian Kolfage and Steve Bannon, the erstwhile chief White House strategist to former President Donald Trump. Along with two associates, Kolfage and Bannon were indicted last August on charges that they siphoned money from the organization for their personal use.

With the government flagging every dime the group collected as the proceeds of fraud, We Build the Wall's general counsel Kris Kobach is lobbying nevertheless to free up those assets. Before his bid to represent Kansas in the U.S. Senate sank in last year's Republican primaries, Kobach was the twice-elected Kansas secretary of state. His losing defense of voter ID laws in that role would earn him court sanctions but also a stint as vice chair of President Donald Trump’s Commission on Election Integrity. The group meant to bolster Trump’s first-term claims of rampant voter fraud disbanded without issuing a single report.

At the hearing Tuesday on We Build the Wall, Kobach's claims found a skeptical audience in U.S. District Judge Lewis Kaplan, sitting on the three-judge appeals panel by designation.

“If the boss of an organized crime family formed an LLC and had all his capos pay money into the LLC instead of giving it to him in cash, can’t the government reach the LLC?” the judge asked.

Justin Weddle, representing We Build the Wall and Kobach, said the nonprofit had an existence apart from its allegedly crooked managers.

But Kolfage “is the crime boss!” Kaplan exclaimed.

We Build the Wall raised some $25 million in private donations but only succeeded in building 3 miles of Trump's long-promised border fence. Prosecutors say the donations came, at least in part, to advertising that the group was staffed by volunteers and that every dollar raised would go toward building the wall. Meanwhile, according to the indictment, Kolfage and Bannon took more than $1 million to pay for cosmetic surgery, a Range Rover, a boat, a golf cart, jewelry, home renovations and more.

“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,” the acting U.S. attorney had said last year.

A triple amputee, Brian Kolfage posted to Instagram this photo of him posing with ex-Kansas Secretary of State Kris Kobach, anti-immigration hardliner who served as general counsel of We Build the Wall. Kolfage was charged on Aug. 20, 2020, with taking money donated for the wall to instead line his pockets and purchase a boat he named Warfighter, as well as cosmetic surgery and a 2018 Land Rover Range Rover. (Image via Courthouse News)

All four defendants have pleaded not guilty. Bannon, who was arrested off the coast of Connecticut on a 150-foot yacht owned by Chinese billionaire Guo Wengui, was pardoned on Trump’s last night in office, leading the court to dismiss his federal indictment only last week. Amid reports that Manhattan District Attorney Cyrus Vance is investigating Bannon for claims under state law, the case against Kolfage and his associates is ongoing.

After the indictments were handed down, the Justice Department froze three of the organization’s bank accounts containing $1.4 million, claiming they were subject to forfeiture. That led to a challenge by Kobach, who came to national prominence both for his attempts to impose strict voter-identification rules and for his hardline anti-immigration views. As late as 2016 Kobach was still raising questions about President Obama’s citizenship that were long debunked as baseless.

Kobach is appealing the December ruling that said We Build the Wall has no right to contest a forfeiture before it occurs. If Kolfage and his associates are convicted and the government moves to take the money, the judge wrote, it can contest the forfeiture then.

Framing this as a due process violation, Kobach says the government has tied up the organization’s assets indefinitely without giving it any ability to vindicate its rights. His brief calls the government’s freeze order “a nuclear weapon” that “is contrary to the plain terms of the applicable statutes, applicable case law, the Constitution, and common sense.”

At oral argument, U.S. Attorney Robert Sobelman told the judges that there was really no difference between We Build the Wall and its indicted managers. “Kolfage was founder, president, and CEO,” he emphasized. “He was able to steal money without anyone stepping in his way.”

U.S. Circuit Judge Raymond Lohier, an Obama appointee, said he understood the claim that Kolfage was “Oz behind the curtain” but questioned whether We Build the Wall might still be an innocent third party. Sobelman said no because “the fraud was lying to the hundreds of thousands of donors saying the founders would get no compensation. So every dollar that came in, whether to build a wall of buy a boat, was fraudulently obtained.”

But Weddle argued that the money in the accounts that was raised to build the wall, and that the organization could now use to build the wall, was never “obtained” by Kolfage or Bannon.

Lohier also questioned whether the court had jurisdiction to hear the appeal because the government hadn’t shut down We Build the Wall; it merely froze some accounts. Weddle responded by detailing an organization “at a standstill” because it had trouble opening a new bank account, can’t pay its outstanding invoices, and can’t even hire people to open and process checks from new donors. “Since last August we have had no expenditures,” he said.

U.S. Circuit Judge Rosemary Pooler, a Clinton appointee, was amazed that there are new donors. “People are still giving money after the indictments?” she asked. “That’s stunning to me.”

Brian Kolfage poses with his wife Ashley in this photo posted to Instagram, set on the Jupiter Marine boat that prosecutors say he bought with money to his charity We Build the Wall. (Photo via Courthouse News)

Weddle noted that We Build the Wall stopped claiming in January 2020 that its founders weren’t getting paid, and 95% of the frozen funds came in after that date.

Pooler wanted to know if it violated due process to make We Build the Wall wait until after the criminal trial to try to get its accounts unfrozen. Weddle replied that the freeze amounted to “zero due process.”

But Sobelman argued that the trial was scheduled for November and that wasn’t an unreasonable amount of time to make the organization wait. He also noted that the District Court had found probable cause to believe that the assets were forfeitable.

Kaplan, also a Clinton appointee, suggested that deciding the issue now was impractical. There would have to be “a fairly massive proceeding to sort out which money is subject to seizure and which isn’t and that could swallow the criminal case,” he said. “So why is this appealable at all since there’s a postconviction remedy?”

As for Trump, the former president distanced himself from We Build the Wall weeks before the indictments when it was reported that the 3-mile section built by the organization was at risk of collapse due to erosion.

“I disagreed with doing this very small (tiny) section of wall, in a tricky area, by a private group which raised money by ads,” Trump wrote. “Should have been built like rest of Wall, 500 plus miles.”

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