Court Testimony: Trump's Former Campaign Manager Paul Manafort Committed Crimes

By Updated at 2018-08-07 18:43:01 +0000


ALEXANDRIA, Va. (Reuters) - Former Trump campaign chairman Paul Manafort’s longtime aide testified at trial on Tuesday that Manafort instructed him not to tell their firm’s bookkeeper about payments from accounts in Cyprus that held millions of dollars in earnings from consulting work for pro-Russian politicians in Ukraine.

Rick Gates, the U.S. government’s star witness in Manafort’s trial on tax and bank fraud charges, told a federal court jury in Alexandria, Virginia, that there were hundreds of emails showing Manafort approved payments out of the Cypriot accounts.

Gates’ testimony on the trial’s sixth day was part of the prosecution’s effort to prove that Manafort was responsible for financial maneuverings that he and other witnesses have testified include filing false tax returns and failing to report foreign bank accounts.

Gates is expected to face a tough cross-examination later on Tuesday by defense lawyers in the first trial to arise from Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 U.S. election. The Kremlin denies election meddling. U.S. President Donald Trump has called for the investigation to be shut down.

One part of Gates’ testimony led to some laughter in the courtroom.

“Not happy. I just saw this. WTF,” Manafort wrote to Gates in an email entered into evidence showing Manafort’s reaction when he learned how much money he would have to pay in 2014 taxes.

Gates, 46, said that he helped create documents to convert some income to a loan to lower Manafort’s tax bill.

“You created a loan agreement for a loan that didn’t exist?” prosecutor Greg Andres asked him. “Yes, we did,” he replied.

Manafort, 69, has pleaded not guilty to 18 counts of bank fraud, tax fraud and failing to disclose foreign bank accounts.

Manafort’s defense is seeking to pin the blame on Gates himself, who has acknowledged embezzling from Manafort’s firm.

Gates, who also was an official on Trump’s campaign, pleaded guilty in February to lying to investigators and conspiring to defraud the United States. He agreed to cooperate and testified in court that he has met with prosecutors about 20 times.

It is unclear what other information he may have provided to Mueller’s investigation, which so far has led to the indictments or guilty pleas of 32 people and three companies.

On Tuesday, Gates also testified about “modified” invoices for payments to U.S. vendors that he said were created at Manafort’s request to meet document requirements for wire transfers out of Manafort’s accounts in Saint Vincent and the Grenadines. The payments were legitimate even if the invoices were fake, Gates said.

He testified about a complex scheme in which earnings from Manafort’s political work in Ukraine would be paid by Ukrainian businessmen using companies in Cyprus to other Cyprus-based companies controlled by Manafort.

Prosecutors showed contracts laying out that Manafort would be paid $4 million a year in quarterly installments of $1 million, all channeled through Cyprus. The funds were logged as loans in order to meet later audits in Cyprus that required documentation of transfers between bank accounts, but Gates testified they were in fact compensation to Manafort.

“A lot of these loan agreements are backdated,” Gates said.

Money from the Ukraine work dried up after pro-Russian President Viktor Yanukovych was forced from power in 2014, Gates testified. A $1 million payment for work in 2014 was “significantly past due” and “Mr. Manafort was quite upset the money had not been sent,” Gates told the court.

Manafort’s Kiev-based aide Konstantin Kilimnik was able to collect $500,000, Gates said, but “to my knowledge it was never paid in full.” Kilimnik was indicted in the Mueller investigation in June.

While outside the scope of the trial, Mueller is also investigating whether Trump campaign members coordinated with Russian officials, an allegation Trump denies.

Gates admitted in testimony on Monday that he did steal money through inflated expense reports, but he said it was hundreds of thousands of dollars, not millions as defense lawyers stated.

Manafort’s lawyers are expected to use the theft to try to undermine Gates’ credibility as a witness. They also are likely to bring up his making false statements to investigators.

One issue that could be a challenge for prosecutors on Tuesday is the extent to which they are allowed to admit evidence about Manafort’s Ukraine work and the oligarchs who paid him. On Monday, U.S. District Judge T.S. Ellis repeatedly clashed with prosecutors about the relevance of such testimony.

AUGUST 6, 2018

Rick Gates, a longtime business associate of ex-Trump aide Paul Manafort, testified at trial that he helped Manafort file false tax returns and hide his foreign bank accounts. Gates is expected to be the government's star witness.

Rick Gates, a longtime business associate of ex-Trump aide Paul Manafort, testified at trial that he helped Manafort file false tax returns and hide his foreign bank accounts. Gates is expected to be the government's star witness.

Taking the stand on the trial’s fifth day, Gates admitted to helping Manafort doctor financial statements, hide sources of foreign income, mislead banks to get loans and cheat on his U.S. taxes. He said he did so at Manafort’s direction.

“At Mr. Manafort’s request we did not disclose foreign bank accounts,” Gates told the jury in federal court in Alexandria, Virginia, describing their relationship of two decades as limited to business. “Outside of business we did not socialize.”

Manafort’s attorneys have signaled they will seek to blame Gates and have accused him of embezzling millions of dollars from Manafort. Gates has been described by witnesses as Manafort’s right-hand man who helped run the operations of a multimillion-dollar political consulting business.

In addition to assisting in Manafort’s alleged crimes, Gates told the jury he had failed to report his own income routed through bank accounts in the United Kingdom and stole several hundreds of thousands of dollars from Manafort by filing false and inflated expense reports related to their work in Ukraine.

Manafort has pleaded not guilty to 18 counts of bank and tax fraud and failing to disclose foreign bank accounts. The charges largely predate his five months on the Trump campaign but were the first to go to trial arising from Special Counsel Robert Mueller’s investigation into Russian interference in the 2016 U.S. election.

The jury has heard how Manafort made tens of millions of dollars for work with pro-Russian politicians in Ukraine. Mueller is also investigating possible coordination between Trump campaign members and Russian officials in the election campaign, but the charges against Manafort do not address that.

Prosecutors on Monday went through a list of overseas corporations and Gates testified that all of them were controlled by Manafort and contained income earned by his political consulting work.

Gates said an associate, Konstantin Kilimnik, had control over the overseas accounts. Kilimnik is a Russian-Ukrainian political consultant who was indicted in June on charges stemming from the Mueller probe. In court filings Mueller has accused Kilimnik of having current ties to Russian intelligence services - an allegation he has denied.

Gates testified that Manafort directed him to report overseas income as loans in order to lower taxable income - an allegation prosecutors have been eliciting testimony about from witnesses since last week.

The jury had heard testimony on Friday and Monday from accountant Cynthia Laporta, who described how Manafort and Gates doctored financial statements and backdated loans.

In questioning Laporta on Monday, a prosecutor asked the accountant about a $10 million loan purportedly received by Manafort from Russian businessman Oleg Deripaska in 2006. Laporta, looking at a summary of loans to Manafort and his businesses, said she could not see any indication that the loan from Deripaska had been paid off.

Since the trial started before U.S. District Judge T.S. Ellis last Tuesday, Manafort’s lawyers have kept their cross-examinations brief and at times refrained from attempting to rebut damaging testimony in detail.

But Laporta’s testimony raised the stakes for Manafort. Testifying under immunity, she was the first witness to admit she knew accounting maneuvers Manafort and Gates requested of her were wrong and could be crimes. One accounting trick saved Manafort $500,000 in taxes, she said.

In cross examining on Monday, attorney Kevin Downing tried to illustrate that Laporta’s accounting firm had been aware of overseas wire transfers being booked as loans for years and highlighted a record showing Manafort had paid $8.4 million in federal income taxes between 2005 and 2015.

Downing also attempted to show that Gates was the point person in dealing with the accountants. But while Laporta acknowledged that she regularly communicated with Gates she said she believed Manafort was in the know.

“In most instances it was clear Mr. Manafort knew what was going on,” Laporta said.

Reporting by Nathan Layne, Sarah N. Lynch and Karen Freifeld in Alexandria, Virginia, Warren Strobel; Editing by Grant McCool and Lisa Shumaker