This week, a developer and entrepreneur once dubbed ” Donald Trump with a Maine accent” had a less auspicious brush with presidential politics than the president-elect.
Gray native Michael Liberty, 56, pleaded guilty to making $22,500 in illegal campaign contributions, which court documents indicate benefited Republican presidential candidate Mitt Romney’s 2012 campaign. Prosecutors are seeking at least six months of jail time and penalties for Liberty, who faces sentencing April 11 in federal court in Portland.
The possibility of jail comes at an already difficult time for Liberty. He separately faces a charge that he lied to federal financial regulators, allegedly hiding money in a company, Xanadu Partners LLC, to avoid paying most of a $6 million penalty levied against him in an earlier fraud investigation. Liberty denies those charges and any misrepresentation of his finances.
A close reading of court documents sheds light on the role of a longtime adviser and business partner in Liberty’s latest legal troubles. It remains to be seen whether damage from his testimony is done.
Further investigation of Liberty’s holdings has turned up both dirt and the perception of dirt. But it’s not clear exactly why and how deeply investigators are digging into the finances of the young mogul, who turned controversial real estate success into a vast array of business ventures in and beyond Maine.
Liberty’s trouble with the SEC stems from 2006 charges that he and others misappropriated about $9 million in investor money, putting it toward personal expenditures or investments.
Liberty faced a penalty of about $6 million, which regulators agreed to cut to about $600,000 because Liberty reported a net worth of negative $30 million. Liberty settled the suit without admitting or denying guilt.
Regulators say they now have reason to believe his financial disclosures were a ruse, based on new evidence that includes emails and testimony from Liberty’s oftentimes second-in-command and more recent courtroom opponent, James G. Stanley Jr.
Stanley stated Liberty didn’t have a personal bank account, using corporate accounts to make personal expenses and investments.
“[Liberty] didn’t want the world to know anything [a]bout Xanadu,” Stanley said in a June 1 deposition.
“I was told not to disclose it to the SEC,” he added.
Stanley’s testimony stands near the heart of the SEC’s new case, which argues that Liberty should pay at least the full penalty for the 2006 charges, plus interest, as he spent or disbursed about $25 million from Xanadu accounts from 2007 through 2010.
Liberty reported to the SEC that Xanadu was owned by a trust established for the benefit of his children. The SEC claims Liberty said Xanadu had no value at the time, but his attorneys argued that’s not the case.
“The report did not list any specific information about the value or income associated with Xanadu,” his attorneys wrote in a response to the SEC complaint.
A long history
Liberty and Stanley have fought in court for years. Their business relationship began to deteriorate in 2007, according to a Maine Supreme Judicial Court ruling issued last year, dealing with a 2012 lawsuit Stanley filed for retirement benefits from the Liberty companies. Stanley had worked for Liberty since 1987.
The state court battles detail a complicated intermingling of personal and business funds at Liberty’s companies, including personal money loaned to the Liberty companies by Stanley and his wife. Such a loan was the subject of a legal battle between the two, resolved last year in a ruling by U.S. District Judge D. Brock Hornby in Stanley’s favor.
That time together spans the bulk of Liberty’s sometimes controversial career and early rise as a real estate developer in Maine. He now lives in Windermere, Florida.
“Depending on whom you talk to, Mike Liberty is either regarded as a Yankee Horatio Alger story or else as an absolute symbol of what has happened to Maine in the past decade, the ultimate opportunist and despoiler of the state, Donald Trump with a Maine accent,” said then-Portland City Councilor Pamela Plumb, in a 1989 profile of Liberty in Yankee magazine. “The truth may be somewhere in the middle or a combination of both.”
Early in his career, Liberty was a developer of the 91-unit Chandler’s Wharf condo project and two office towers at 100 Middle St. in Portland. He also was an owner of the Oxford Plains Speedway. His later career has been defined by founding the mobile payment startup Mozido, based in Austin, Texas.
Forbes magazine reported in June that the startup missed payroll multiple times earlier this year and that a former director, Philip Geier, received subpoenas from the Department of Justice and SEC related to Mozido’s records.
In the charges against Liberty, the legal scuffles with Stanley loom in the background.
Stanley’s attorney Toby Dilworth said his client’s June 2016 deposition regarding Xanadu was related to recently settled litigation between Liberty and Stanley. He declined to say more because of a confidentiality agreement.
Liberty’s Philadelphia-based attorney, Jay Dubow, said he was unsure of the reason for Stanley’s deposition and was unaware of any connection between the elections and SEC charges.
A possible link
Federal investigators and parties in the case did not disclose the reason for the probe into Liberty’s campaign contributions, or any connection between that case and the earlier fraud investigation.
The U.S. attorney’s office also did not identify the candidate or the people in whose names Liberty made contributions. But information provided in the complaints makes clear at least some of the parties in question, including Stanley.
The complaint also deals only with contributions of $2,500, the maximum that individuals can give to a single primary or general election candidate under federal election laws. Liberty gave the maximum amount to both candidates. The complaint specifies that nine donations from Liberty’s “employees, family members and associates” made up $22,500 in contributions between May 13, 2011, and June 1, 2011.
No other Maine donors made the maximum contribution to Pawlenty for that time, according to campaign finance records. But 10 contributors from Maine did max out to the Romney primary campaign. A few had clear connections to Liberty, including Stanley.
The complaint specifies that an executive at one of Liberty’s companies wrote a check for $2,500 and got three other employees to write checks for that amount to the unspecified campaign, for which they were later reimbursed.
Campaign finance records show Stanley, as CEO of The Liberty Group, contributed $2,500 on the same day as Linda Swan, a property manager for Liberty Management, and two apparent relatives of Liberty’s.
The case has spurred questions at the state level, as well. In a blog post for the Bangor Daily News on Friday, author and Maine People’s Alliance Communications Director Mike Tipping reported many of the same contributors linked to Liberty donated to Gov. Paul LePage’s 2010 election effort.