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Accountants testify Manafort inflated loans, failed to disclose foreign accounts

August 3, 2018 at 7:27 PM

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Prosecutors in the trial of President Trump's former aide Paul Manafort continued to focus on Manafort's finances during the fourth day of his trial on Aug. 3, as his former accountant testified. (Reuters)

One of Paul Manafort’s accountants testified Friday that she went along with falsifying his tax records because she was afraid to confront a longtime client.

Cindy Laporta said that in 2015, Manafort’s right-hand man, Rick Gates, told her his boss couldn’t afford to pay his taxes. To ease that burden, she said, Gates instructed her to misrepresent $900,000 in income as a business loan.

“I had a couple of choices at that point,” Laporta said. “I could have refused to file the tax return,” which she said could lead to litigation with Manafort’s firm.

“I could have called Mr. Manafort and Mr. Gates liars,” she said. “But Mr. Manafort was a longtime client of the firm and I did not want to do that, either.”

Laporta, who testified after she was granted immunity, said “I very much regret” the decision to go along with a plan that she estimated saved Manafort at least $400,000 in taxes.

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Former Trump campaign manager Paul Manafort is on trial for tax and bank fraud. The case has exposed his lavish spending on luxury clothes. (Patrick Martin, Elyse Samuels/The Washington Post)

It was the fourth day of trial in a packed federal courtroom in Alexandria in which Manafort, President Trump’s onetime campaign chairman, is fighting bank and tax fraud charges. Prosecutors allege he failed to pay taxes on millions of dollars he made from his work for a Russia-friendly Ukrainian political party, then lied about his income to get loans when the cash stopped coming in.

Manafort, wearing a blue suit, blue shirt and purple tie, looked engaged during Friday’s proceedings — sometimes taking notes, sometimes looking at the attorneys or witnesses and sometimes staring straight ahead.

Laporta, the accountant, described a conference call with Gates in which he said Manafort could not afford to pay his taxes and discussed the possibility of reducing them by reporting a loan from an entity in Cyprus called Telmar Investments that prosecutors contend Manafort controlled. Laporta testified she did not believe such a loan actually existed.

Laporta said she asked Gates for a record of the loan and he provided a two-page document that bore what she said was Manafort’s signature.

She testified that she also helped Manafort obtain millions of dolllars in loans fraudulently, including by representing rental property as a second home, sending a bank a loan-forgiveness letter she believed to be forged, and telling another bank that Manafort expected a $2.4 million payment when she had “no idea” if that was true.

Defense attorneys have sought to cast Manafort as a dupe of his business partner, Gates, who was accused in the same indictment as Manafort and has pleaded guilty to conspiracy and lying to the FBI.

Prosecutors hoped to convince jurors that Manafort, not his business partner, his bookkeeper or anyone else, was primarily responsible for alleged tax dodges and bank fraud.

Earlier Friday, another of Manafort’s accountants took the stand, and a prosecutor asked him who among Manafort’s circle was in charge of financial decisions.

The tax preparer, Philip Ayliff, replied decisively: “Mr. Manafort.”

Assistant U.S. Attorney Uzo Asonye drilled into what Ayliff knew about the relationship between Manafort and Gates. Ayliff said Gates was “working closely with Mr. Manafort,” and was Manafort’s “right hand” adviser.

Asonye guided jurors through the details of the alleged tax fraud, showing them Manafort’s personal and business tax returns. Even as testimony turned complicated, the jurors appeared to pay careful attention. Several took copious notes in black notebooks, and virtually all looked at the monitors in front of them as attorneys zoomed in on portions of documents they sought to highlight.

During recent years, Manafort reported making healthy incomes — $504,744 in 2010; $3,071,409 in 2011; $5,361,007 in 2012; $1,910,928 in 2013; $2,984,210 in 2014. But prosecutors say he was making millions more from his work in Ukraine, stashing it in foreign bank accounts and using it to buy luxuries such as a now infamous $15,000 ostrich-leather bomber jacket.

Asonye flashed the tax returns, one by one, in front of the jurors, asking Ayliff in relation to each: How many foreign bank accounts did Manafort report having?

“None,” Ayliff said, as the exercise was repeated five times.

The prosecution turned to emails to show Manafort’s failure to report the bank accounts was no mere mistake. One 2011 email showed Ayliff asking Manafort whether he had any interest in a foreign bank account. Manafort responded that he did not. Ayliff testified that his firm relied on the representations of Gates and Manafort, and that the men never told him of the foreign accounts.

Under defense cross-examination, Ayliff acknowledged that reporting requirements for foreign bank accounts can be complicated. Lead defense attorney Kevin Downing pointed to emails about a foreign telecommunications firm in which Manafort invested but over which he had no decision-making authority. His accountants determined that his investment was not large enough to trigger foreign bank account reporting requirements.

“Did you have difficulty getting information?” Downing asked.

“Yes,” Ayliff said.

“Primarily that information was provided by Mr. Gates, is that correct?” Downing asked.

“Yes,” Ayliff said.

Downing displayed a financial document that featured large block letters at the top: “This is a loan … per Rick Gates call.”

The trial is expected to resume Monday afternoon.

Justin Jouvenal contributed to this report.

Rachel Weiner tries to cover Alexandria's federal court from a small windowless room with no cellphone access. She sometimes ventures outside to write about crime in Alexandria and Arlington.

Matt Zapotosky covers the Justice Department for The Washington Post's national security team. He has previously worked covering the federal courthouse in Alexandria and local law enforcement in Prince George's County and Southern Maryland.

Moriah Balingit is an education reporter for The Washington Post, where she has worked since 2014. She previously covered crime, city hall and crime in city hall at the Pittsburgh Post-Gazette.

Steve Thompson writes about government and politics in Maryland, D.C. and Virginia. Before joining The Washington Post in 2018, he was an investigative reporter for the Dallas Morning News. He started his career as a police reporter at the St. Petersburg Times.

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