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Former White House chief strategist Steve Bannon exits the Manhattan Federal Court, in New York, on Aug. 20, 2020.ANDREW KELLY/Reuters

U.S. President Donald Trump’s former chief strategist, Steve Bannon, was pulled from a luxury yacht and arrested Thursday on allegations that he and three associates ripped off donors trying to fund a southern border wall, making him the latest in a long list of Trump allies to be charged with a crime.

The organizers of the “We Build The Wall” group portrayed themselves as eager to help the President build a “big beautiful” barrier along the U.S.-Mexico border, as he promised during the 2016 campaign. They raised more than US$25-million from thousands of donors and pledged that 100 per cent of the money would be used for the project.

But according to the criminal charges unsealed Thursday, much of the money never made it to the wall. Instead, it was used to line the pockets of group members, including Mr. Bannon, who served in the Trump White House and worked for his campaign. He allegedly took more than US$1-million, using some to secretly pay co-defendant Brian Kolfage, the founder of the project, and to cover hundreds of thousands of dollars in personal expenses.

Hours after his arrest, Mr. Bannon pleaded not guilty during an appearance in a Manhattan federal court. He is the latest addition to a long list of Trump associates who have been prosecuted, including his former campaign chair, Paul Manafort, whom Mr. Bannon replaced, his long-time lawyer, Michael Cohen, and his former national security adviser, Michael Flynn.

Mr. Trump has also made clear that he is willing to use his near-limitless pardon power to help political allies escape legal jeopardy, most recently commuting the sentence of long-time political adviser Roger Stone.

Mr. Bannon was taken into custody around 7 a.m. by the U.S. Postal Inspection Service on a 45-metre yacht called Lady May, which was off the coast of Connecticut, authorities said. The boat is owned by exiled Chinese billionaire Guo Wengui and currently for sale for nearly US$28-million. According to Marine Traffic, a commercial tracking service, the vessel’s transponder signal went dark on June 17, shortly after it departed a port in Connecticut en route to Miami, potentially indicating its beacon was inoperable or had been turned off.

At his hearing, Mr. Bannon appeared by video with his hands cuffed in front of him and a white mask covering most of his face. He rocked back and forth on a chair in a holding cell with his lawyers on the telephone. The magistrate judge approved Mr. Bannon’s release on US$5-million bail, secured by US$1.75-million in assets.

Neither Mr. Bannon, nor his spokesperson or attorney responded to requests for comment Thursday. Mr. Kolfage did not respond either. Also charged were Andrew Badolato and Timothy Shea, the owner of an energy-drink company called Winning Energy. The company’s cans feature a cartoon superhero image of Mr. Trump and claim to contain “12 oz. of liberal tears.” Mr. Shea appeared at a brief virtual hearing in Denver.

Other prominent members of the wall group included former Kansas secretary of state Kris Kobach, its general counsel; Erik Prince, founder of the controversial security firm Blackwater; former Republican congressman Tom Tancredo of Colorado; and former baseball pitcher Curt Schilling. They were not named in the indictment.

After the arrest, Mr. Trump quickly distanced himself from Mr. Bannon and the project.

“When I read about it, I didn’t like it. I said this is for government, this isn’t for private people. And it sounded to me like showboating,” he told reporters at the White House, adding that he felt “very badly” about the situation.

An immigration plan unveiled by Mr. Trump last year included a proposal to allow the public to donate toward his long-promised wall, as group had originally said was its mission before shifting its focus to private construction. But Mr. Trump later denounced the project publicly, tweeting last month that he “disagreed with doing this very small [tiny] section of wall, in a tricky area, by a private group which raised money by ads” and claiming, “It was only done to make me look bad.”

Attorney-General William Barr told the Associated Press he had been made aware of the investigation into Mr. Bannon months ago but did not say whether the President had been informed.

According to the indictment, the defendants used fake invoices, another non-profit and sham vendor arrangements to try to hide their efforts to siphon money. Under the arrangement, Mr. Bannon and his co-defendants allegedly paid Mr. Kolfage US$100,000 up front and an additional US$20,000 monthly, all while claiming they served as volunteers and that Mr. Kolfage was not paid.

The indictment said Mr. Kolfage “went so far as to send mass e-mails to his donors asking them to purchase coffee from his unrelated business, telling donors the coffee company was the only way he ‘keeps his family fed and a roof over their head.’ "

Mr. Kolfage eventually spent some of the more than US$350,000 he received on home renovations, payments toward a boat, a luxury SUV, a golf cart, jewellery, cosmetic surgery, personal tax payments and credit card debt.

Charges included conspiracy to commit wire fraud and conspiracy to commit money laundering.

Originally called “We the People Build the Wall,” the campaign launched in December, 2018, and raised approximately US$17-million in its first week. But it soon drew scrutiny, according to the indictment. The crowdfunding site that hosted the campaign suspended it and threatened to return donations unless the money was transferred to a legitimate non-profit. Mr. Bannon was brought in around that time.

Dustin Stockton, who helped start the campaign and then left the project to work on the 2020 presidential election, said it seemed clear that prosecutors were “attacking political infrastructure that supports President Trump right before the election.” He was not charged in the case.

Benjamin Harnwell, who with Mr. Bannon launched an institute in Italy to train future populists, called the indictment “spurious” and evidence that the “forces of darkness” would stop at nothing to destroy the combative Mr. Bannon.

A voice of nationalist, outsider conservatism, Mr. Bannon led the conservative Breitbart News before being tapped to serve as chief executive officer of Mr. Trump’s campaign in its critical final months. He later served as chief strategist during the turbulent early days of the Trump administration and was at the forefront of many of its most contentious policies, including its travel ban on several majority-Muslim countries.

But Mr. Bannon, who clashed with other top advisers, was pushed out after less than a year. And his split with Mr. Trump deepened after he was quoted in a 2018 book making critical remarks about some of Mr. Trump’s adult children. Mr. Bannon apologized and soon stepped down as chairman of Breitbart.

Mr. Bannon, who served in the U.S. Navy and worked as an investment banker at Goldman Sachs and as a Hollywood producer before turning to politics, is the host of a pro-Trump podcast called War Room, which began during the President’s impeachment proceedings and has continued during the pandemic.

A day before the indictment was unsealed, Mr. Kolfage was a featured guest on the show and solicited donations.

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