By Sarah N. Lynch and Nathan Layne
(Reuters) - The head of a Chicago-based bank was charged in an indictment unsealed on Thursday with bribery and accused of corruptly approving high-risk loans to President Donald Trump's former campaign chairman Paul Manafort in a scheme to land a top Trump administration post such as secretary of the U.S. Army.
Stephen Calk, who was chairman and CEO of Federal Savings Bank though is now on a leave of absence, was charged by federal prosecutors in New York with one count of financial institution bribery, which carries a maximum prison term of 30 years.
Calk's name repeatedly came up during Manafort's 2018 financial fraud trial in Virginia, with prosecutors saying he approved $16 million in loans for Manafort in exchange for help securing a senior federal post under Trump. Calk, 54, was named to a Trump campaign economic advisory committee and interviewed for the job of Army under secretary but did not land that job.
Jeremy Margolis, Calk's lawyer, said his client would fight the charges, which he called "a travesty." Calk is scheduled to appear before a federal judge in Manhattan later on Thursday.
"Mr. Calk has done nothing wrong and will be exonerated at trial of the baseless isolated charge brought against him," Margolis said in a statement.
Federal Savings Bank said in a statement it is a victim of bank fraud perpetrated by Manafort, and that Calk "has been on a complete leave of absence and has no control over or involvement with the bank." The bank said it is "not a party to the federal criminal case" and described Calk as its "former chairman."
Calk's brother, John Calk, is currently serving as the bank's CEO, according to the bank.
The indictment did not mention Manafort by name, but made clear he was the one who schemed with Calk.
Calk provided Manafort with a ranked wish list of government jobs, and Manafort recommended to Trump's post-election transition team before he became president that Calk be appointed as Army secretary, the service's top civilian post, according to the indictment. Calk served in the Army for 16 years, Margolis said.
Manafort also used his influence with Trump's transition team to land Calk a formal interview for the position of under secretary of the Army in January 2017, though Calk was not selected for that position or any other government job, according to the indictment.
Calk's wish list also included treasury secretary or deputy secretary, defense secretary, commerce secretary and 19 ambassador posts in countries including Britain, France, Germany and Italy.
Calk "abused the power entrusted to him as the top official of a federally insured bank by approving millions of dollars in high-risk loans in an effort to secure a personal benefit, namely an appointment as Secretary of the Army or another similarly high-level position," said Audrey Strauss, the top prosecutor overseeing the case in Manhattan.
Manafort was one of the first people in Trump's inner circle charged by Special Counsel Robert Mueller as part of his now-completed investigation into Russian interference in the 2016 U.S. election and Trump campaign contacts with Moscow.
Manafort, who was convicted of bank and tax fraud in Virginia and pleaded guilty to other charges in Washington, is serving a 7-1/2-year sentence in a federal prison in Pennsylvania.
His criminal trial revealed that he hid millions of dollars from U.S. tax authorities that he was paid as a political consultant to pro-Russia politicians in Ukraine to fund a life of luxury. Later, when the work dried up, he lied to banks to secure loans to maintain his lifestyle, according to trial evidence.
The indictment against Calk alleges he knew of "significant red flags" about Manafort's ability to repay the loans. In July 2017, the Office of the Comptroller of the Currency, the agency that regulated the bank, downgraded the credit quality of Manafort's loans to "substandard." Prosecutors said Calk lied when questioned by regulators, saying he "never desired a position" in Trump's administration.
Mueller's report listed 14 criminal referrals made by the special counsel to other federal prosecutors. Calk's case likely was among those.
The prospect of Calk facing charges emerged in a transcript of a bench discussion during the Manafort trial in which prosecutor Greg Andres called him a "co-conspirator" who "participated in a conspiracy to defraud the bank."
During Manafort's trial, Federal Savings Bank employee Dennis Raico testified against Manafort in exchange for immunity from prosecution, telling jurors Calk took a "personal interest" in Manafort's loans.
Raico testified that Calk asked him to call Manafort shortly after the November 2016 election won by Trump to inquire if he could be a candidate for two Cabinet posts. Raico said the request made him uncomfortable, and he said he had never seen loans approved so quickly.
(Reporting by Sarah N. Lynch in Washington and Nathan Layne in New York; Editing by Will Dunham)