Here’s what you need to know about Day 5 of this trial:
- Rick Gates, Paul Manafort’s longtime business partner, testifies they committed bank and tax fraud
- Gates admits he embezzled hundreds of thousands from Manafort
- Judge Ellis and prosecutors spar over Ukrainian work
5:58 p.m.: Prosecutor Greg Andres gets into argument with judge after testimony ends
After dismissing the jury, Judge Ellis laid into prosecutor Greg Andres for what he saw as unnecessary questioning about the motivations of billionaires involved in politics in Ukraine.
Andres pushed back angrily, prompting a heated exchange that went on for more than 10 minutes.
Ellis repeatedly criticized Andres for not making eye contact, saying “look at me,” and saying he “looked down as if to say, ‘that’s BS.’ ”
Andres responded with frustration saying, “You continue to interpret our reactions in some way,” when the lawyers don’t do the same to the judge.
“You never rolled your eyes,” Ellis said, a reference to when he criticized the attorneys for doing so last week, “but you’re not the only one sitting at that table.”
The substance of the argument is how prosecutors can characterize the people who paid Manafort through companies in Cyprus.
He has already barred prosecutors from using the word “oligarch.” Andres had asked Gates whether these men were billionaires who benefited financially when their political party did well, and Gates agreed.
After court, Andres said he had to have Gates explain their financial motivations because Ellis had interjected and called their spending “political contributions.”
“These people are not like any Americans,” Andres said, after Ellis for the second time invoked the Koch brothers and George Soros for comparison.
“These people are oligarchs, and that means they control a segment of the economy based on the government’s allowing them to do that,” Andres said.
Ellis cut in, laughing: “That makes it even clearer to me that it doesn’t have anything to do with the allegations in this case,” he said. “It throws dirt on these people. They may deserve it; I don’t know and I don’t care.” It’s irrelevant, the judge added, to whether Manafort reported and paid taxes on the money they paid him.
Andres said that “respectfully,” he disagreed.
“It proves the flow of money,” he said. “We’re just trying to prove these men in Ukraine are the payers.” The payments come from companies in Cyprus that are not in their names to companies in Cyprus not in Manafort’s name, and so they need to show these people “have the ability to make these payments” and the motivation.
Ellis disputed that he had limited prosecutors significantly or interrupted them often, and said the record would support him on that.
“I will stand by the record as well,” Andres retorted.
“All right, then you will lose,” Ellis replied.
Testimony has wrapped for the day and will resume at 9:30 a.m. Tuesday.
5:47 p.m.: Gates testifies he moved money from offshore accounts
Andres began questioning Gates about his work with Manafort on parliamentary elections in Ukraine beginning in 2007. Gates was asked to review several emails between Manafort and Ukrainian political officials and businessmen, which were displayed for jurors.
Gates said the operatives in Ukraine paid Manafort millions of dollars for political and policy work by wiring money from their companies in Cyprus to Manafort’s unreported foreign bank account in Cyprus.
At times, Gates testified that Manafort would move money from Cyprus to his U.S. accounts.
When Gates said Manafort was moving money from Cyprus, he said he was talking not about “shell companies” but “shelf companies” — as in, off-the-shelf, premade for someone to take over.
“They’re already on the shelf,” he explained.
Gates acknowledged under questioning by Andres on Monday afternoon that he has a powerful incentive to cooperate with prosecutors. If the government determines that Gates’s assistance in their case against Manafort is “substantial,” he could avoid jail time.
Judge Ellis emphasized several times that it would be up to the judge overseeing Gates’s plea agreement in Washington — U.S. District Judge Amy Berman Jackson — to assess Gates’s cooperation and decide whether to sentence him to a term of probation.
5:35 p.m.: Judge, prosecutors spar over pace of the case
Late in the afternoon Monday, prosecutors sparred notably with Judge T.S. Ellis III over the pace of the case.
The heated confrontation came as prosecutors attempted to enter into evidence Rick Gates’s passport to show details of his travels to Ukraine and Cyprus. Ellis interrupted them.
“Let’s get to the heart of the matter,” he scowled.
“Judge, we’ve been at the heart …” prosecutor Greg Andres interrupted.
“Just listen to me!” Ellis bellowed from the bench.
By the judge’s way of thinking, Manafort’s defense was not contesting the places where Gates had traveled, and thus there was no reason to show jurors pictures of Gates’s passport. By Andres’s telling, Gates’s travels were relevant to the case, and defense attorneys had not conceded to any sort of instruction that would tell jurors where Gates had gone.
Ellis told Andres he was looking for ways to “expedite.” Andres responded, “We’re doing everything we can to move the trial along.” The dispute seemed to die for a moment, but later, as Andres asked questions about Gates’s work overseas, Ellis again grew irritated.
“We need to focus sharply,” Ellis told the prosecutor. Andres tried to explain his line of inquiry.
“Next question,” the judge snapped.
“The government … ” Andres started to say.
“Next question,” Ellis snapped again, his voice rising.
Andres moved on.
5:26 p.m.: Gates admits to long list of wrongdoing
Rick Gates met with investigators 20 times, he testified Monday, and made the government aware of a bevy of his own wrongdoing — including that he had inflated expense reports to steal from his former business partner.
“I made the government aware” of that conduct, he testified.
While Gates will be a key witness against Paul Manafort, his early testimony was just as much a reckoning of his own wrongdoing. He admitted that he was a party not only to what he said was Manafort’s fraud, but that he committed wrongdoing that was all his own — in one instance even violating the terms of his supervised release, when he missed an 11 p.m. curfew by 15 minutes.
Manafort has sat stoically through the testimony, staring at his former business partner, who is key to the prosecution’s case. Gates, though, did not say exclusively bad things about his former boss. At one point, testifying about the work the two men did in Ukraine, Gates said of Manafort:
“He’s probably one of the most politically brilliant strategists I’ve ever worked with.”
Manafort did not noticeably react.
While helping him commit crimes, Rick Gates admits he also embezzled from his former boss, something Paul Manafort’s defense attorneys have said repeatedly throughout the trial.
Gates said he had authority over some of Manafort’s Cyprus accounts, which were set up by a law firm in that country. “I added money to expense reports and created expense reports” that were not accurate, he said, to pad his salary by “several hundred thousand” dollars.
He said he had embezzled from other employers as well and that he volunteered this information in his meetings with the government.
Gates said he also told prosecutors that he had lied in a deposition in a civil case against Manafort involving a private equity fund.
And, he said, as a favor to a friend, Steven Brown, he wrote a letter claiming that Brown had income that did not exist. Brown is facing fraud prosecution in New York federal court.
As part of his plea deal, Gates said prosecutors agreed not to pursue charges on those fronts and to drop a second indictment against him in Alexandria accusing him of bank and tax fraud. Gates said he was guilty of those crimes, having wired money from Cyprus through the United Kingdom to the United States without paying taxes on it for himself.
Gates admitted he did lie to investigators while negotiating a plea deal, claiming a March 2013 meeting with a lobbyist and a congressman did not include a discussion of Ukraine.
He also admitted wiring money from Cyprus for Manafort that was not declared as income, and falsifying financial documents when Manafort was “hoping to receive” bank loans.
Asked whether he got any personal benefit from Manafort’s falsified loan applications, Gates responded, “No, I did not.”
Under his plea agreement, Gates said he can go to prison for 10 years but his guidelines are 57 to 71 months, and prosecutors will not stop his attorney from asking for a probationary sentence.
But, he said, new charges could be brought against him if he fails to abide by the deal’s conditions, including telling the truth.
Manafort has continued to stare directly at Gates, leaning forward a bit in his seat, throughout the testimony, while Gates has avoided eye contact.
Gates has repeatedly said that he committed the majority of his crimes at Manafort’s direction. Off the top of his head, he named 12 overseas companies he said Manafort controlled; on prompting from prosecutors, he identified three more. “Yes,” they all belonged to Manafort he said. The money in them “came from income from political consulting in Ukraine,” he said.
“Two directors from a legal firm” in Cyprus set up the majority of the accounts, he said, and he or Manafort would contact them about wiring money.
Presented with a copy of the plea agreement he signed in federal court in Washington, Gates said he conspired with Manafort to falsify Manafort’s tax returns. Gates said he and Manafort knowingly failed to report foreign bank accounts and had failed to register Manafort as a foreign agent.
Andres, the prosecutor, asked Gates whether he understood that his lies to Manafort’s accountants and omissions were illegal.
“Yes,” Gates said.
When asked why he had lied, Gates said he had done so at Manafort’s request.
Separately, Gates explained that Manfort had directed him to report money wired from his foreign bank accounts as loans, rather than as income, to reduce Manafort’s taxable income. By reporting it as a loan, Gates explained, Manafort could defer the amount of taxes he owed.
Shortly after 4 p.m., Rick Gates, dressed in a blue suit, white shirt and gold tie, walked down one aisle in the courtroom and took the witness stand, where he was questioned by prosecutor Greg Andres.
Gates, 46, spoke quickly, looking at the prosecutor rather than at Manafort.
Manafort, seated between his lawyers in a dark suit, white shirt and purple tie, stared intently at his former business partner as he spoke.
Andres’s early questions focused on the two men’s relationship. Gates testified that he met Manafort as an intern at a Christmas party at Manafort’s house, and he worked in the late 1990s at a political firm where Manafort was a partner, Black Manafort Stone and Kelly.
In 2006, Gates testified, he began working at Davis Manafort Partners and kept working there in 2012, when the firm became known as DMP International LLC.
Gates said his responsibilities increased over the years, but he considered himself merely “an employee of the firm,” and he believed Manafort thought of him the same way. He said the two men did not socialize outside of work, though they sometimes met about work at Manafort’s homes.
After addressing the two men’s work, Andres moved to the heart of the case.
“Did you commit crimes with Mr. Manafort?” the prosecutor asked.
“Yes,” Gates responded.
Gates went on to acknowledge his plea agreement, and the parties soon conferred at the judge’s bench to discuss it. As they did so, Gates continued to stare ahead, not looking at Manafort. Manafort took a few notes.
4:21 p.m. Rick Gates has been called to testify
The prosecution’s star witness and Paul Manafort’s former business partner has been called to testify, after brief testimony from a Treasury official.
4:15 p.m.: Treasury agent says Manafort never filed foreign bank account reports
Paula Liss, a special agent with the Financial Crimes Enforcement Network of the Treasury Department, testified that Paul Manafort did not file any reports of foreign bank accounts between 2011 and 2014, nor did his wife.
On cross-examination, Manafort’s defense again tried to emphasize how complicated these reporting requirements are. Thomas Zehnle asked about foreign corporations in which an American has less than a 50 percent stake; Liss agreed that those do not have to be reported but noted there is such a thing as “indirect ownership.” Zehnle asked whether exchange rates can make it difficult to determine whether a person’s foreign holdings exceed the $10,000, and Liss agreed.
On redirect, Assistant U.S. Attorney Uzo Asonye tried to boil it down: if in 2010 and 2011, Paul Manafort’s consulting firm had a foreign bank account with more than $10,000 in it, controlled by a company that was 100 percent owned by Paul Manafort, would that require reporting, he asked.
“Yes,” Liss said.
4:08 p.m.: Prosecutors call Treasury official, not Rick Gates, as next witness
The prosecution has just called its next witness, Paula Liss, a special agent with the Financial Crimes Enforcement Network of the Treasury Department, who is an expert in money-laundering and accounting.
One of Paul Manafort’s attorneys had previously said the next witness would be Rick Gates, but apparently prosecutors had other plans.
Liss took the stand at 4 p.m., after a lengthy private conference between the judge and lawyers on both sides. Judge Ellis admonished the prosecutor to limit the scope of his questions to those agreed to during the session held out of earshot of the jury and the public.
4 p.m.: Accountant testifies on Manafort income
Paul Manafort did not file 2016 tax returns declaring a $1.9 million loan from Telmar Investments as income and paying a penalty until Oct. 16, 2017 — after he knew he was under investigation and just two weeks before he was indicted in D.C. federal court, according to documents introduced by his defense.
Prosecutors say the company was a shell he used to hide income in Cyprus.
Assistant U.S. Attorney Uzo Asonye elicited that information on redirect questioning of accountant Cindy Laporta. He asked her whether, even if a loan disguising income is eventually “forgiven” and paid off, calling it a loan is still false. She said, “Yes.” Asonye also totaled up the taxes paid by Manafort between 2005 and 2015 on about $31 million in income.
“Is that less than $60 million?” Asonye asked.
“Yes,” she said.
Prosecutors say Manafort made over $60 million in Ukraine during that time period.
Asonye also asked Laporta whether she had any evidence that large “purported loans” from Oleg Deripaska, a Russian oligarch, were ever repaid or reclassified as income.
He also tried to rebut the defense argument that errors in Manafort’s taxes could be chalked up to their complicated nature.
He asked if she was confused about whether a condo Manafort owned in Lower Manhattan was a rental property or a second home. “Was I confused? No,” she said. Manafort classified it as a rental for tax purposes but a second home to get a new loan, according to her testimony.
Asonye asked if it required a certain expertise to know that a loan forgiveness letter Rick Gates sent her had been “backdated” to look like it was written eight months earlier. “No,” she said.
He asked if she needed expertise to know that you can’t disguise income as a loan. “No,” she said.
“Is that complicated?” he asked. “No,” she said.
“Did you need to be an expert to know that that was wrong?” he asked.
“No,” she said.
3:02 p.m.: Rick Gates to be next witness at Manafort trial
Rick Gates, Paul Manafort’s former business partner and prosecutors’ expected star witness, will testify next, Manafort’s defense attorney said.
Defense attorney Kevin Downing made the revelation toward the end of his cross examination of one of Manafort’s accountants. As he tried to question the accountant, Cindy Laporta, about what he said was Gates embezzling from Manafort, a prosecutor interrupted, saying he should not be allowed to ask about facts that were not yet in evidence.
Downing thundered back that prosecutors knew such facts might soon be discussed, adding, “Mr. Gates is next up.”
Gates is expected to offer key testimony fleshing out allegations that Manafort filed false tax returns, committed bank fraud and lied to get loans worth millions. It will likely be one of the most dramatic moments of the high-profile trial.
Gates, who was originally charged as a co-conspirator in the case, is cooperating with prosecutors after working out a plea deal. He pleaded guilty to conspiracy and lying to the FBI in February.
Gates, whom multiple people have called Manafort’s “right-hand man” during the trial, had an unparalleled view of Manafort’s business and financial dealings, so his testimony could prove damning for Manafort.
Defense attorneys have sought to portray Gates as the architect of any financial wrongdoing, saying he had control of Manafort’s finances and sought to line his own pockets.
Several prosecution witnesses have challenged that contention, portraying Manafort as intimately involved in decisions about his finances.
Downing has now finished his questioning of Laporta. Prosecutors say they will have about 15 more minutes of questions for the accountant before the next witness. Court is on a break until 3:05 p.m.
2:45 p.m.: Accountant testifies Manafort made more than $30 million over a decade
Manafort’s attorneys are now arguing that he did ultimately declare many of the loans prosecutors called fraudulent as income.
Defense attorney Kevin Downing showed accountant Cindy Laporta a spreadsheet of his liabilities from 2005 to 2015 pulled from his tax filings. Laporta said her firm would make these spreadsheets for clients to be better prepared for the next year. Included is a $10 million loan from Russian oligarch Oleg Deripaska in 2010, as well as one marked only “Russian NGO” from the following year for $3.5 million.
“There are over $30 million in loans reported?” Downing asked. She agreed. About $10 million came from Yiakora Ventures, which prosecutors describe as one of Manafort’s shell companies.
But Downing pointed out that $15.7 million was set to be categorized as a distribution to Paul Manafort — meaning he would have paid taxes on it.
Downing then asked Laporta to look at Manafort’s 2016 tax return. Her firm did not prepare it, but his new accountants relied in part on information she gave them.
Assistant U.S. Attorney Uzo Asonye objected, saying 2016 is outside the time frame of the tax fraud alleged in the trial. But Judge Ellis allowed the defense to proceed.
Laporta, the accountant, confirmed that the spreadsheet she prepared showed that Manafort had reported $30.2 million in gross income to the federal government during the 10-year period and paid $8.38 million in federal income tax. In 2016, she said, his return showed he reported as income a $1.9 million loan from Telmar Investments, another Cypriot company that prosecutors say he used to avoid taxes. He also paid a $30,000 penalty.
Downing is arguing that Manafort ultimately did pay his taxes, and that any lapses were simply mistakes made in a small and complicated business. He asked her if it was common in partnerships for a partner to pay for some expenses and call it loan to the firm, then forgive that loan — she agreed that it was.
2:14 p.m.: Attorney tries to highlight complexity of Manafort’s finances, Gates role
In his early questioning of accountant Cindy Laporta on Monday, defense attorney Kevin Downing seemed to be trying to highlight two themes.
Paul Manafort’s finances were so complicated that sorting through them each year was a chore even for his accountants. And Rick Gates was deeply involved in the process.
Downing asked Laporta about various properties Manafort owned in New York, highlighting how each year their status seemed to change. Sometimes they were used as rentals, sometimes as personal homes and frequently each was being renovated, Laporta testified.
“It was difficult to follow,” she said.
Prosecutors have accused Manafort of deceiving banks about the status of his properties to help him get loans. But Downing sought to cast as mere mistakes what prosecutors view as intentional misrepresentations.
Under Downing’s questioning, Laporta also conceded that she “relied on Rick Gates’s facts” as to how each property was used.
The testimony is important because prosecutors must prove Manafort was knowingly deceiving banks and the IRS. If jurors are to conclude that Manafort was merely sloppy with his finances — Laporta testified she was often getting materials close to when filings were due — that could benefit his defense. Laporta’s testimony about Gates, too, is somewhat helpful to defense attorneys, as they have sought to blame Manafort’s business partner for any wrongdoing.
1:55 p.m.: Testimony resumes with Manafort’s attorney taking aim at accountant’s work
Kevin Downing’s cross-examination of accountant Cindy Laporta began as expected with him casting blame on both the accounting firm Kositzka, Wicks & Co. and Rick Gates for any issues with Manafort’s tax and loan documents.
First Downing asked why Laporta, who described herself as specializing in audits, was in charge of Manafort’s tax returns. She said that she worked with Philip Ayliff and a team on Manafort’s taxes, which is standard at the firm.
Next, Downing asked whether it was “quite a chore” to get Manfort’s financial information, and whether the team often ran up against deadlines and was frustrated by the disorganized, inefficient process.
“Yes,” Laporta responded.
She also agreed that they often went to Gates for that information.
“There came a point in time when you didn’t believe what Mr. Gates was saying to you?” Downing asked.
“That is correct,” Laporta replied.
1:15 p.m.: Key exhibits from Manafort’s trial so far
The special counsel has entered into evidence dozens of emails and financial documents. The emails are key to their case, because several show Paul Manafort participating in conversations involving financial claims his former accountant Cindy Laporta has testified were fraudulent.
Manafort’s deputy, Rick Gates, was the driving force in most of these conversations. It was Gates who emailed Laporta and other accountants in 2015 about adjusting a loan to save Manafort money on his taxes. It was Gates who asked to edit Manafort’s 2015 Profit & Loss Statement to reflect $2.6 million in as-yet unreported income. And it was Gates who drafted a loan forgiveness letter Laporta described as fake.
But in an October 2016 email, Manafort himself sent what his bookkeeper testified was a false Profit & Loss Statement to the Federal Savings Bank, showing more than $3 million in income. Laporta asked Gates in an email about a $1.9 million loan from Telmar Investments, which prosecutors describe as a shell company; Gates forwarded the question to Manafort. He was included on emails claiming a $1.5 million loan from another alleged shell company had been forgiven.
Emails also show Manafort discussing renting out a property he owned with his family in Lower Manhattan and later getting a loan on that property; Laporta testified that he instructed her to call it a second home to get a better rate.
In 2009, Manafort was on an email chain in which another accountant who testified last week, Philip Ayliff, asked Manafort about international wire transfers and warning that the Treasury Department has “really clamped down on these disclosures.” The following year, it was Manafort who emailed Ayliff to say he had no foreign accounts.
The documents also paint a picture of Manafort as financially strapped in 2016, the same year he volunteered to work for Donald Trump’s campaign for free. In an April 2016 email, his bookkeeper says his consulting firm’s health insurance policy is about to be canceled because it hasn’t been paid. In the 2016 financial documents she prepared, the firm is losing hundreds of thousands of dollars a month — more than $600,000 by August and more than $1 million by the end of the year.
With the trial scheduled to resume at 1 p.m., a representative from the special counsel’s office has just carted a stack of boxes into the courtroom. In a sign that prosecutors may plan to call Rick Gates to testify later today, two of the boxes are labeled “Gates.”
The courtroom is jam-packed, probably in anticipation of Gates’s testimony, with spectators having lined up for seats more than an hour in advance. Paul Manafort’s wife is again seated in the front row.
Read Devlin Barret’s report on this coming showdown from today’s Post:
Paul Manafort’s trial resumes Monday afternoon with the cross-examination of accountant Cindy Laporta. Just before recessing court Friday, Judge T.S. Ellis III told Manafort’s defense team that they were “not limited” in how they used the fact that Laporta is testifying under immunity from prosecution.
The “use immunity” order signed by Ellis compels Laporta to testify. Recognizing that she would invoke her Fifth Amendment privilege against self-incrimination, it says the Department of Justice has granted Laporta “immunity from the use against her in any criminal case of any testimony or other information compelled under such an order, or any information directly or indirectly derived from such testimony or other information.”
That means Laporta can’t be prosecuted using what she said in court or any of the documents she handed over to the special counsel. On Friday, she testified that she helped falsify financial documents to save Manafort money on his taxes and get loans from banks. Manafort directed the fraud, she testified, along with his deputy, Rick Gates.
Defense attorneys will probably argue that Laporta is only saying what the special counsel wants to hear to avoid prosecution herself.
Laporta is the first of five potential witnesses testifying under immunity orders. Conor O’Brien worked with her at the firm KWC and was on a conference call in which Gates said Manafort’s income taxes were too high and should be brought down by inflating the size of a loan. “The loan amount may need to be changed,” he wrote.
Prosecutors have pared down their case at Judge Ellis’s urging, and if Laporta covered everything O’Brien would have testified about, he might not be called.
The other immunized potential witnesses are Jim Brennan and Dennis Raico, both employees of the Federal Savings Bank, and Donna Duggan, an insurance broker. All were involved in Manafort’s efforts to secure loans.
12:30 p.m.: What to expect day 5
Prosecutors laid out a substantial portion of their case against Paul Manafort in the trial’s first week. They showed jurors how Manafort lived large in the early 2000s — buying designer suits and expensive home renovations with money he made working from a pro-Russia presidential candidate in Ukraine — but then struggled as the candidate was chased from his home country, and his payments to Manafort dried up.
Prosecutors concluded the week with damaging testimony from one of Manafort’s former accountants, who admitted that, as Manafort struggled to maintain his lavish lifestyle, she knowingly submitted false information to the IRS and to banks so her client could save money in taxes or qualify for loans.
The accountant, Cindy Laporta, testified under a grant of immunity, and essentially admitted to participating in the tax and bank fraud of which Manafort is accused.
As week two begins, all eyes will be on Rick Gates — Manafort’s former business partner and the presumed star witness for the prosecution. While Manafort’s accountant described submitting false information to benefit Manafort, she often did so in consultation with Gates. Gates will have to explain what was going on behind the scenes between him and Manafort.
Gates’s testimony could be critical to the prosecution’s bid to show that Manafort acted intentionally to deceive banks and the IRS. But it will be equally important for Manafort’s defense, which has said Gates was the one who engineered the fraud of which Manafort is accused because he was embezzling money from Manafort’s company and trying to cover his tracks.
Prosecutors have said they could rest their case as early as this week. Testimony resumes at 1 p.m., when defense attorneys will get their first opportunity to question Laporta.