This bank was under investigation until Trump got elected -- and now it's involved in multiple Kushner deals

A bank that had been under federal investigation until last year has played a role in two recent real estate transactions involving Kushner Companies, Jared Kushner’s family company.

Earlier this month, BofI Federal took over a mortgage previously owned by the Kushner Companies for a development in Brooklyn, New York City real estate filings show. The previously unreported transaction involves a loan on a development project in the historically industrial, now gentrifying Bushwick neighborhood. Kushner Companies had made a loan of roughly $30 million to the project at 215 Moore Street in late 2016. Jared Kushner remains a senior adviser to President Donald Trump.

BofI, which was previously known as Bank of Internet USA, said in a statement to ProPublica that it “has no exposure or relationship with Mr. Kushner or his company with respect to 215 Moore St.” The bank likened the transaction to a routine refinancing.

In another transaction last October, the Kushner Companies got a $57 million loan on one of its own projects in New Jersey. BofI Federal provided much of the money behind that loan, Bloomberg reported last week.

BofI Federal Bank faced a Securities and Exchange Commission investigation into its lending practices and conflict of interest policies until last year. After multiple subpoenas in 2016, the SEC closed the investigation in late June 2017.

Kushner stepped away from the management of his family real estate company to join the Trump White House but held onto many of his family company’s assets, including the Bushwick project debt. Ethics experts have criticized the arrangement, saying it could create conflicts of interest if Kushner Companies business partners have business before the government.

Based in San Diego, the publicly traded BofI Federal does most of its real estate lending in California, and has only a small presence in the New York market. It has attracted attention from short-selling investors, who question the bank’s business model and practices. The company has said the investors have purveyed misleading information.

In November 2016, shortly after the presidential election, Kushner Companies announced it was pursuing a new line of business in lending money to other developers’ projects.

That month, the company made a loan of at least $33 million to a well-known New York developer, Toby Moskovits, for a project in Brooklyn. The developers have dubbed the project at 215 Moore Street and several adjacent lots the “Bushwick Generator.” The project is targeting what they describe as “the job-generating tech and creative firms that are repowering Brooklyn’s economy.” On a recent visit, the project was still under construction. Most of the rundown former industrial building was still open to the sky, except for a central open-plan office area where a vintage Singer sewing machine table acts as a front desk.

In a transaction inked in early April, the Kushner Companies debt was transferred to BofI, which is now the lender on the project, real estate filings show. Public records don’t reveal the terms of the BofI transaction and whether Kushner Companies made money or otherwise benefitted.

In a statement, BofI said that it had no relationship with Kushner regarding the Bushwick property. The bank said the owner of the Bushwick project was a pre-existing customer. BofI “decided, after carefully underwriting the transaction, to provide financing to one of our prior customers,” the bank said in a statement.

A Kushner Companies spokeswoman said that the owners of the project exited from the loan and “repaid the Kushner lending arm.” She declined to elaborate on the terms.

BofI also played a role in an earlier Kushner Companies transaction in Jersey City, New Jersey, across the Hudson River from Manhattan. Bloomberg reported that BofI provided much of the money for a $57 million October 2017 loan to the One Journal Square development.

The Jersey City loan was issued by Fortress Investment Group and BofI purchased an interest in the loan from Fortress. In its statement, BofI said the terms of that deal are confidential. “Banks routinely purchase participation interests in loans made by other institutional investors,” the statement said.

In the hunt for funding for the same Jersey City project, Kushner’s sister drew negative attention last year when she pitched Chinese investors using a controversial program that gives visas to foreigners who invest in the U.S.

The SEC investigation of BofI was closed without any action on June 27, 2017, several months before the first of the known Kushner transactions, according to documents obtained through public records requests by investment research outfit Probes Reporter.

As part of its investigation, the SEC subpoenaed documents from BofI relating to its internal controls, conflicts of interest policies, and residential loans to foreigners, among other matters.

The New York Post reported early last year that the Justice Department was also looking into issues at the bank related to possible money laundering. “We are not aware of any ongoing DOJ or Treasury investigation,” the company said in a statement.

The White House didn’t immediately respond to a request for comment.

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• The Trump Administration

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