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Prosecutors say Manafort’s wealth was fueled by lies to IRS and banks

Before he joined the Trump campaign, Paul Manafort made a name for himself in the D.C. lobbying world, but his past caught up with him. (Video: Dalton Bennett, Jon Gerberg, Jesse Mesner-Hage/The Washington Post)

President Trump’s former campaign chairman Paul Manafort went on trial Tuesday in federal court in Alexandria, Va., where prosecutors charged that his personal fortune was propped up by years of lies to tax authorities and banks.

The first trial to arise out of the investigation run by special counsel Robert S. Mueller III got off to a fast start Tuesday, as a jury of six men and six women was picked — and opening statements delivered — in less than a day.

The stakes are extremely high. For the 69-year-old Manafort, a conviction on the most serious charges could lead to an effective life prison sentence. For Mueller and his team probing Russian interference in the 2016 election, a courtroom loss could damage his credibility and amplify calls by Republicans for his investigation to be shut down. And for the president, a conviction of his former senior aide would increase the pressure on Manafort to cooperate with Mueller in a bid for leniency.

The prosecution on July 31 portrayed President Trump's former campaign chairman Paul Manafort as a man who felt tax and banking laws did not apply to him. (Video: Reuters)

“A man in this courtroom believed the law did not apply to him,” Assistant U.S. Attorney Uzo Asonye told the jury. “Not tax law, not banking law.”

The defense, in rebuttal, said that Manafort was a victim of the deceptions of his former partner, now a government witness, and that any failure to pay taxes was inadvertent.

From six homes to a city jail: Manafort, who redefined lobbying, faces trial

Manafort faces 18 charges of financial fraud, as prosecutors say he failed to pay taxes on some of the millions of dollars he made working as a strategist for a political party in Ukraine, and then lied to banks to get loans when those payments stopped. Though the case grew out of the special counsel probe, the trial will not delve into issues surrounding Russian interference in the 2016 election; it is about Manafort’s money.

Manafort faces a second trial in September in federal court in the District on related charges that include failing to register as a foreign lobbyist.

Manafort collected more than $60 million between 2010 and 2014 from his Ukraine work, where President Viktor Yanuko­vych, an ally of the Kremlin, was Manafort’s “golden goose,” ­Asonye said.

When Yanukovych had to flee Ukraine for Russia in 2014, Manafort’s “cash spigot” was shut off, the prosecutor said, and the political strategist set out to generate money by lying to banks on loan applications.

Asonye said Manafort misstated his income and hid debt to get banks to approve the loans; Manafort’s company DMP reported no profits in 2016. “He created cash out of thin air,” Asonye said.

Manafort “got whatever he wanted,” the prosecutor said, including a $15,000 ostrich coat and a $2 million house “just a stone’s throw away” from the courtroom where he is now on trial.

Asonye’s efforts to paint Manafort as a free-spending tax cheat were interrupted more than once by U.S. District Judge T.S. Ellis III, who noted “it isn’t a crime to be profligate in your spending.”

The prosecutor said the charges boil down to “one simple issue: Paul Manafort lied.”

Here are six things you need to know about Paul Manafort’s trial

Manafort’s defense lawyer Thomas Zehnle said the case was about “taxes and trust,” and that the real liar was not Manafort, but his former right-hand man, Rick Gates.

Gates has pleaded guilty to conspiring to defraud the United States and to lying to the FBI, and as part of his plea deal he agreed to provide evidence against others, including his former colleague.

“Mr. Manafort placed his trust in the wrong person,” Zehnle said, arguing that his client built “one of the most successful political consulting and government relations shops in Washington,” while also working on “the global stage.”

That work is not partisan, Zehnle said, pointing out that Tad Devine, a former strategist for Sen. Bernie Sanders (I-Vt.), would testify about working in Ukraine with Manafort.

Zehnle said Manafort’s work for Yanukovych was to “bring the country closer to Western democracies after decades of Soviet rule” — toward the European Union and away from Russia. That comment was met with audible sneers from a few members of the gallery. Protests in Ukraine were first triggered in late 2013 by Yanukovych’s decision to not sign an E.U. association agreement, an embrace of the West that Russia opposed.

Zehnle said Manafort also never intentionally deceived the IRS about his income and that his client made mistakes, not realizing he needed to file certain forms and make certain declarations.

“This is not a case where someone flew to Switzerland and stashed money in an account,” Zehnle said. The lawyer also said that earlier in the investigation, Manafort willingly sat down with FBI agents investigating the misuse of funds in Ukraine.

Manafort’s defense strategy appears aimed at the credibility of Gates, the star witness against him, by accusing Manafort’s ­onetime protege and partner of embezzling millions of dollars.

“Rick Gates had his hand in the cookie jar, and he couldn’t take the risk that his boss might find out,” Zehnle said. He said Gates prevented other people involved in Manafort’s finances — accountants and bookkeepers — from sharing information about the accounts with each other.

On the first day of the trial, the Northern Virginia federal courthouse lived up to its reputation as a “rocket docket” where cases move quickly. In a matter of a few hours, the judge had winnowed a jury pool of about 60 people down to 12 jurors and four alternates.

After lunch, opening statements took about an hour, followed by the trial’s first witness, Devine.

The architect of Sanders’s presidential campaign, Devine also worked closely with Manafort as a political consultant in Ukraine — a striking example of how U.S. political consultants from across the spectrum take their expertise overseas, where they can often earn large amounts of money advising foreign politicians.

Devine said he worked for Yanukovych’s Party of Regions in Ukraine from 2005 to 2010 and returned briefly for a project in 2014. “It was an incredible operation,” he said of his first campaign there. Manafort had hired great people, he said, and had “substantial resources. . . . I was really impressed by him.”

Devine said Yanukovych won the presidency in 2010 because of the “excellent campaign that Paul ran.” Devine said he produced TV commercials and wrote speeches for Yanukovych, earning $500,000 and a bonus of $100,000 when Manafort’s client won.

While working on the campaign, Devine met other Manafort associates who have since come under investigation, including Gates and Konstantin Kilimnik, a Russian citizen. At the time, Devine said, Kilimnik worked as a translator. Prosecutors have said Kilimnik has ties to Russian intelligence, and they accused him and Manafort of trying to tamper with witnesses earlier this year.

Devine said Manafort was clearly the boss in his relationship with Gates, though they were partners.

“Paul was in charge,” Devine said. “Rick worked for Paul.”

Matt Zapotosky contributed to this report.

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