Are Bernie and his wife guilty of fraud and corruption?
Should Jane Sanders be charged with bank fraud? Should her husband?
The prospect of Senator Bernie Sanders’s being charged with a finance-related felony — for chiseling a bank, a public agency, and a church out of a seven-figure sum on behalf of a pinko private school known for its study-abroad program in Cuba — suggests an almost Shakespearean undoing. The Vermont socialist has made a pretty good career (the only real job he’s ever had) out of denouncing financial institutions whose businesses and products he does not understand. And he, along with his Democratic-primary rival, Hillary Rodham Clinton, has specifically complained that no major Wall Street figures were charged with criminal wrongdoing after the financial crisis of 2008–09.
“It is an outrage that not one major Wall Street executive has gone to jail for causing the near-collapse of the economy,” Senator Sanders thundered.
What about causing the collapse of a Vermont college?
Mrs. Sanders has a problem. As president of Burlington College, she cooked up an ambitious — grandiose, really — plan to double the size of the tiny institution, which had long been struggling financially. And she began with that most old-fashioned of investments: real estate, a 33-acre tract owned by the Catholic Diocese of Burlington. So, take out a mortgage and buy the land, right? That would be the most straightforward way to go about doing it, but very few things in public finance — and there is a public element here — take the straightforward path.
Instead, Mrs. Sanders worked out a deal between the Vermont Educational and Health Buildings Finance Agency (of course there is a Vermont Educational and Health Buildings Finance Agency! how could there not be?) and People’s United Bank (of course Mrs. Socialist chose “People’s United Bank”) under which the state agency would issue tax-exempt bonds and the bank would purchase them, with Burlington College on the hook for making good on the debt service. What Mrs. Sanders offered in collateral for the deal was $2.6 million in funding commitments from private donors and grant-making institutions.
She did not have anything like that much in the way of real commitments. And, after loading up the college with debt and doubling the size of its paid staff, she was unable to deliver on her end of the deal, stiffing the diocese to the tune of about $1 million and presumably inflicting a substantial loss on the bank, too, though the extent of it remains publicly unknown. Our progressive friends value transparency in all things, except their own finances. Mrs. Sanders eventually resigned but walked away with a six-figure severance package.
The financial damage to Burlington College was so severe that the institution simply shut down.
The problem for Mrs. Sanders isn’t that she was a terrible fundraiser. The problem is that she lied to the bank about the institution’s financial commitments. She claimed that she had that $2.6 million and more in the bag, but the college’s actual audit showed only $1.3 million in commitments. Donor-supported institutions account for donations at the time the commitments are booked: If the XYZ Foundation commits to giving you $1 million over the next four years, you book the $1 million donation at the time the commitment is entered into. If Mrs. Sanders had in fact had the hard commitments — the kind of thing you can literally take to the bank — then they would have showed up on the college audit. The discrepancy between the audit and the loan documents suggests something very close to an open-and-shut fraud case.
The “optics,” as we’ve all been taught to say, are pretty bad. The Sanders family has prospered while the senator preaches socialism: They famously own three homes, including a vacation property that, given the character of the couple in question, we might as well go ahead and call a dacha. Mrs. Sanders became an executive and got carried away with herself, entered into a dodgy financial relationship with a bank that certainly seems to have failed to do its due diligence and apply rigorous underwriting standards to the pet project of a politically connected borrower, used a state agency to implement her scheme, burdened her institution with irresponsible levels of debt, and then exited with a golden parachute while the institutional stakeholders and other parties to the deal got screwed.
None of this is new. The details of the case have been publicly known since 2015. What’s changed is that Barack Obama was president in 2015, and the Obama administration had no enemies to the left: From the New Black Panthers’ polling-place shenanigans in Philadelphia to Mrs. Sanders’s questionable business dealings, the acting attorney general of the United States was Mr. Magoo. But in the Trump era, the feds have taken an interest in the Sanders gang.
Given the discrepancy between the Burlington College audit and Mrs. Sanders’s claims on the borrowing documents she signed, any prosecutor who wants to hang her scalp on the wall has a ready-made conviction. But the FBI takes less of an interest in quotidian bank-fraud cases than it does in political corruption, and that is the live question: Did Senator Sanders lean on People’s United Bank or the Vermont Educational and Health Buildings Finance Agency (which, again, exists) in order to encourage them to finance his wife’s daffy plans without taking too hard a look at the college’s books?
Here, things are a little murkier. The public claim that Senator Sanders pressured the bank to make the deal came from Vermont Republican-party vice chairman Brady Toensing, who based his claim on a conversation with Don Turner, the minority leader in the state house. Turner had had lunch with three bankers who said that they had been told that Sanders’s office had pressured the bank. They claimed no firsthand knowledge of the transaction, and Turner himself has described the conversation as “hearsay.” He has declined to make known the identity of the bankers in question, and they apparently do not wish to be publicly involved in the case.
Senator Sanders strongly denies using his office to speed along his wife’s land deal.
You don’t convict a senator of financial corruption based on hearsay, but in some circumstances hearsay can be sufficient to launch an investigation. Sanders protests that the usual shadowy right-wing conspiracy is going after his wife in order to silence him, and Alan Dershowitz, who is no friend of Sanders, has suggested that this looks like tit-for-tat, a politically motivated prosecution of a high-profile progressive in retaliation for . . . something, perhaps the investigation into the Trump campaign’s (possible) links to Russian hackers or other nefarious foreigners. But this is not a case manufactured out of whole cloth: There is real evidence of financial wrongdoing here.
It is tempting to argue that Sanders should be held to the Sanders standard: There were in fact a few prosecutions following the financial crisis, but, for the most part, there were no criminal cases associated with those troubled banks and financial institutions — because there wasn’t any real evidence that crimes had been committed. The scary thing about the financial crisis is that it wasn’t the result of a fiendish plot: It was the result of a lot of bad investments by bankers and Wall Street guys. It’s not like Dick Fuld at Lehman Brothers had some grand plan to get rich by losing $1 billion of his own money. People make mistakes.
Jane Sanders made some mistakes, too. But she also seems to have misled a federally insured bank about her institution’s finances. The little people go to jail for that: Former NFL star and pastor Irving Fryar got five years in prison for intentionally misleading a half dozen banks in a series of home-equity-loan applications. (His 74-year-old mother was convicted, too.) In 2013, a Montana man got eleven years in prison for mortgage fraud — and sentences can run as long as 30 years. It is a serious crime. So is using your political office to suborn improper lending. Irrespective of any partisan motive on the part of the Sanderses’ Republican antagonists in Vermont, this warrants investigation.
In the interest of transparency, Senator Sanders should disclose all communications he may have had with People’s United Bank or any other individual or institution involved in this scheme. He’d demand no less from anyone else in his position. If he fails to do so, investigators should not hesitate to subpoena the information before the situation turns into another Hillary Rodham Clinton–style fiasco of incomplete compliance and “accidentally” destroyed communications.
Are all bank fraudsters equal? Or are some more equal than others? Senator Sanders owes us an answer.