Follow our coverage of Day 7 here.
Paul Manafort, President Trump’s onetime campaign chairman, is on trial in federal court in Alexandria on bank and tax fraud charges. Prosecutors allege that he failed to pay taxes on millions he made from his work for a Russia-friendly Ukrainian political party, then lied to get loans when the cash stopped coming in.
The case is being prosecuted by the special counsel investigating Russian interference in the 2016 U.S. presidential election.
Here’s what you need to know about Day 6 of this trial:
- Manafort’s longtime business partner Rick Gates took the stand for a second day.
- He admitted to having an extra-marital affair in London and to embezzling from Manafort.
- Gates testified about how he and Manafort set up offshore accounts in Cyprus to transfer money to the U.S.
5:27 p.m.: Judge questions how closely Manafort watches money
Just before the jury left for the day, Rick Gates echoed other prosecution witnesses in saying Paul Manafort kept a close eye on his financial affairs.
“Mr. Manafort in my opinion kept fairly frequent updates,” Gates said, after a discussion of movement between their consulting firm’s offshore accounts. “Mr. Manafort was very good at knowing where the money was and where it was going.”
Judge Ellis, as he has repeatedly, interjected.
“He didn’t know about the money you were stealing,” Ellis said, “so he didn’t do it that closely.”
The comment by the judge goes to a question at the heart of the trial — how much fraud could possibly have gone on under Manafort’s nose without his knowledge.
Downing also challenged Gates on his acceptance of responsibility, pointing out that he has not repaid the money he stole from Manafort.
“I spent it over the years,” Gates said.
5:17 p.m.: In tense cross-examination, Gates says Manafort has yet to face his crimes
In one of the most tense exchanges yet during his cross examination, Rick Gates compared his situation directly with that of his former business partner, suggesting that he had taken responsibility for his actions, while Manafort chose to fight at trial.
The comment came in the midst of a heated exchange with defense attorney Kevin Downing. Downing had just finished questioning Gates about what seemed to be foreign money that was not reported. Downing suggested that was because Manafort’s accounting firm advised that it need not be reported, though Gates fired back that it was because the firm did not have complete information.
“At Mr. Manafort’s request, he asked me not to disclose the other foreign bank accounts,” Gates said.
Downing then asked Gates about the records he had to support his assertions about Manafort. Gates responded, “a lot of our communication occurred verbally,” though he asserted that there as a “strong record” to support his account of conversations the two men had. Downing continued to spar with Gates, and questioned whether the jury could believe what he was saying.
“After all the lies you’ve told and fraud you’ve committed, you expect this jury to believe you?” Downing asked.
“Yes,” Gates responded flatly.
The two men continued to talk over one another, and Gates remarked, “I’m here to tell the truth.”
That’s when his commentary turned to Manafort.
“Mr. Manafort had the same path,” Gates said. “I’m here.”
Gates added later that he had “accepted responsibility.”
“I’m trying to change,” he said.
The acceptance of responsibility was a notable moment, though on the witness stand, Gates has, at times, not fully embraced the wrongdoing he has previously admitted to. In an earlier confrontation with Downing, for example. Gates initially declined to use the word “embezzlement” to describe his taking Manafort’s money.
“It is an unauthorized transaction,” he said at one point.
“Why can’t you say embezzlement?” Downing countered.
“It was embezzlement from Mr. Manafort,” Gates finally conceded.
4:57 p.m.: Gates testifies he wired offshore money into his company
Earlier in the day, Rick Gates testified about how he used to create fake invoices at times to submit to offshore banks to get them to wire funds to Paul Manafort to support Manafort’s lifestyle. Now he has testified that he would at times use the same process to cause banks to wire money from an account belonging to Manafort to a company controlled by Gates himself.
Manafort’s defense attorney, Kevin Downing, walked Gates through a series of such wire transfers. In one case, Gates testified that he submitted a false invoice for “professional services” to an offshore bank to get it to transfer $65,000 from Global Endeavor Inc. into a company called Jemina, and from there into Gates’s own account.
In another instance, Gates submitted a false invoice to cause Global Endeavor to transfer $125,000 into a different company called Bade LLC, which Gates also controlled.
Gates tripped up as he explained the reason for these transfers, repeatedly agreeing that some of the money was unauthorized but also that some was to reimburse him for business expenses, and some were bonuses from Manafort.
Downing asked pointedly why would Gates have called these transfers reimbursements for expenses. With that opening, Gates offered remorse to the jury. “I was, in essence, living beyond my means,” he said.
“It was a difficult time,” he went on. “I regret it, clearly. I’m taking responsibility for it. I made a mistake.”
Downing responded, “Was it for your secret life?”
Gates responded: “It’s not a secret life. It went to an account my wife knew about.”
4:30 p.m.: A question about Trump, an objection and a delay
As soon as Kevin Downing tried to ask Rick Gates whether “other members of the special counsel’s office” had asked about his time on the Trump campaign, prosecutors objected.
A bench conference ensued, and Judge Ellis abruptly announced a half-hour break.
Before that, Gates agreed that if he had been indicted in the Eastern District of Virginia on bank and tax fraud charges, he would have faced a “quite significant” sentence, “in excess of 50 to 100 years.”
Downing said it would be up to 290 years; Gates did not recall that number.
Downing also accused Gates of falsely using money from Manafort’s firm to take trips to Las Vegas, buy sound equipment and shop at Whole Foods in Richmond. Gates said he did spend firm money on those things but that he did not believe it came from offshore accounts. The Vegas trips were for his movie production venture, he said, not for fun.
It was in connection to that venture that Gates said he wrote a false letter claiming his company would be investing a large sum of money in his friend Steve Brown’s movie project.
“I did it as a favor,” Gates said.
“You committed fraud as a favor?” Downing asked skeptically.
“I did, I admitted to that,” Gates responded.
But he said he did not recall saying or being confronted with any accusation that he took money from Brown as well.
He did acknowledge receiving a letter from the SEC about an investigation into insider trading as part of his position on the board of an identity-theft protection firm called ID Watchdog. But he said he did not retain a lawyer at that point, nor was he told by the special counsel that he might be prosecuted.
Downing jumped around with his accusations, and it was not always clear whether Gates was reluctant to admit wrongdoing or genuinely confused. But the broader point being made was clear: Gates has been involved in a lot of questionable business activity.
4:13 p.m.: Rick Gates won’t look at Manafort during testimony
As he did yesterday, Rick Gates has assiduously avoided looking at Manafort during today’s testimony. Manafort has occasionally stared up at Gates, but he has also frequently looked at monitors showing documents, or occasionally just off into the courtroom.
Manafort’s demeanor during the day seemed somewhat changed from when his business partner first took the stand and Manafort stared intently in that direction.
As cross examination of Gates began, though, Manafort resumed staring at Gates.
4:07 p.m.: Manafort’s attorney tries to paint Rick Gates as taking advantage of his client
Defense attorney Kevin Downing seemed intent early in his cross examination of Rick Gates to drive home a theme.
Rick Gates repeatedly took advantage of Manafort when it came to money, and he lied about it so frequently that it was now difficult to sort fact from fiction.
Downing, for example, pressed Gates on an investment he made in a high-frequency trading company Manafort had started with another partner in 2011. Gates told Downing that $250,000 of the money was his, because it was a bonus from Manafort. Downing asked, hadn’t he already received a $240,000 salary, plus a $60,000 bonus from Manafort that year? And were there any emails to support that Manafort was still giving him another $250,000?
Gates said the money was a bonus, though he said he didn’t believe there were any emails to support his claim.
Downing then presented Gates with some sort of document showing money transfers from 2010 to 2014, some of them large dollar amounts out of Cypriot accounts. Gates acknowledged that the list included “unauthorized transfers.” But as Downing pressed him on which transfers were unauthorized, and how much money he obtained inappropriately, Gates repeatedly said he could not say.
It was possible that the problem was the document Downing presented. Gates said at one point he could not provide an “exact breakdown” based on “the sheet you gave me.” But the line of questioning also prompted him to say repeatedly that he did not “recall” the money transfers to which Downing was referring, and which Downing claimed the special counsel had previously asked Gates about.
Downing pointed out that Gates’s memory was much clearer when a prosecutor was the one doing the questioning.
“Have they confronted you with so many lies you can’t remember any of it?” Downing asked.
3:55 p.m.: Gates admits he may have improperly submitted personal expenses to Trump committee
As defense attorney Kevin Downing vigorously questioned Rick Gates about all the ways in which he had stolen money from Manafort and others, Gates made a notable confession, acknowledging that it was possible he had submitted personal expenses to President Trump’s inaugural committee for reimbursement.
Gates said the process for seeking reimbursement was well overseen, but he conceded that he might have gotten paid for something he shouldn’t have.
“Did you submit personal expenses to the inaugural committee for reimbursement?” Downing asked in the middle of a heated exchange on the topic.
3:47 p.m.: Gates admits embezzling and conducting transatlantic extramarital affair
In the middle of other queries, Manafort defense attorney Kevin Downing suddenly veered in a different direction: “There was another Richard Gates, isn’t that right?” he asked. “A secret Richard Gates?” he asked.
Before even being asked the question directly, Gates, in a quiet, strained voice, told Downing that it was true — he said about 10 years ago, he had “another relationship.” In other words, he had had an extramarital affair.
Downing asked Gates whether his secret life had taken place in London. Gates acknowledged that the relationship had taken him to London and other places.
“As part of your secret life, did you have a flat? Is that what they call an apartment in London?” Downing asked.
Gates acknowledged that, yes, for about two months he had kept a separate apartment in London. He agreed that he had also flown first-class and stayed in luxury hotels as part his relationship.
Gates testified that he had embezzled from Manafort and conducted the affair.
This post has been updated.
3:36 p.m.: Defense attorney comes out swinging, calls Gates a liar
Defense attorney Kevin Downing, who has been an affable presence in court thus far, even when cross-examining government witnesses, came out swinging against their star cooperator Rick Gates.
“When did you start providing false and misleading information to the special counsel’s office?” he asked.
Gates pleaded guilty in Washington, D.C., federal court to doing just that. But as he did earlier, he seemed to waver on whether he actually lied or simply misspoke about a meeting Manafort took with a U.S. congressman.
“There were instances when I struggled in interviews” with details, he said. “I struggled to get all the information out, to some extent.”
Judge Ellis interjected to clarify that he had pleaded guilty to lying — “I did, to one count, your honor,” Gates acknowledged.
Downing asked whether special counsel attorney Andrew Weissmann told Gates that he had “no chance of getting a plea agreement” after learning that he had lied. Gates said no, he just had to agree to plead guilty to the false statement charge as well as conspiracy.
“You knowingly and intentionally lied?” Downing asked.
“Uh . . . yes,” Gates finally said. But he added, “I provided false information to the special counsel’s office prior to my plea agreement,” not after. In his many sessions preparing for trial, he said, he told the truth.
Downing also emphasized that if they are satisfied with Gates’s cooperation, prosecutors will not object to his lawyer’s request for a probationary sentence.
He then began to drill down into Gates’s testimony, implying that given his history and motivations, everything he has said is suspect.
Some of the only direct references to President Trump and his campaign at the trial of Paul Manafort just occurred. Rick Gates testified that Manafort resigned as the campaign’s chairman in August 2016, but that he remained, continuing to work for the campaign.
After Trump’s election, Gates went to work for the committee organizing Trump’s inauguration.
Prosecutor Greg Andres showed Gates emails from Manafort, which showed that Gates’s former boss requested that Gates use his position in the Trump campaign to offer a series of favors to Stephen Calk, the founder and CEO of Federal Savings Bank, one of the banks that extended Manafort a loan in 2016.
First, Calk’s name was added to a list of national economic advisers to the campaign. Then, in November 2016, Manafort wrote Gates: “We need to discuss Steve Calk for Sec of the Army. I hear the list is being considered this weekend,” indicating that wanted Gates’s help getting Calk considered by the presidential transition for the job.
Then, in December 2016, Manafort wrote Gates an email he marked “urgent,” listing people Manafort wanted to be invited to Trump’s inauguration in January. Included on the list were Calk and his son.
Gates testified that Manafort was so hard up for cash that he was having trouble paying for the Yankees season tickets that he had held since 2006.
Gates said Manafort asked whether his former business partner would do him a “favor,” and write a letter claiming that he, Gates, was responsible for purchasing the tickets.
Gates said he had not purchased the tickets himself, though he has acknowledged previously that he occasionally used Manafort’s seats. He said the purchase was causing Manafort a credit card debt of nearly $225,000, and the letter was meant to alleviate that debt.
Prosecutors have finished their questioning of Gates. Defense attorneys will begin questioning him at 2:45 p.m.
2:22 p.m.: Gates testifies that Manafort falsified a financial statement himself
Having testified that he altered Davis Manafort Partners’ 2015 Profit & Loss Statement at Paul Manafort’s direction, Rick Gates went on to say his boss similarly doctored his 2016 statement to obtain a different loan.
In October 2016, Gates said he sent Manafort a bookkeeper’s Profit & Loss Statement in PDF format from 2016 through June.
In an email shown in court, Manafort responded, “How do I convert into non-PDF Word document?”
Gates responded, “I can do it and will send to you.”
Asked why Manafort would want a Word document version of the statement, Gates gave the obvious answer: “He is going to make some sort of change to it.”
In the email, he told his boss, “Here you go, it’s a Word document now.”
In a subsequent email, in all capital letters, Manafort wrote: “I HAVE ATTACHED A REVISED P&L. PLEASE REVIEW IT AND CALL ME TO DISCUSS THIS AND OTHER MATTERS.”
The original statement from bookkeeper Heather Washkuhn showed that the firm had lost more than $600,000 that year. The statement Manafort sent back to Gates showed a profit of about $3 million.
It’s “about $4.2 million” off from reality, Gates testified.
Manafort sent that doctored statement to Federal Savings Bank, another email shows.
2:10 p.m.: Gates testifies he made up $6 million in income to help get loan
Rick Gates took the stand again after the lunch break, describing for jurors a 2016 effort he undertook to edit a profit-and-loss statement to help Paul Manafort get a loan.
In March 2016, Gates testified, Manafort was seeking a loan from the Banc of California, but needed to show that his business was making enough income so that he would qualify. The pair had a profit-and-loss statement that showed about $400,000 in income, but that was far below what the business had made previously. Gates testified that he then set out to edit it, and made clear from whom that instruction came.
“Who directed you to alter it,” prosecutor Greg Andres asked.
“Mr. Manafort,” Gates responded.
The effort he undertook looked almost amateurish as it was exposed in its full detail by emails shown to jurors. Gates first asked Manafort’s bookkeeper for a word document of the statement, and when she said she could not provide that, he asked her for an “original” PDF. The bookkeeper balked, saying her system only allowed her to print a statement and scan it.
Gates testified that he wanted to add income to the statement, and the scanned document “was in no position to be able to be edited.”
Gates ultimately got the profits and loss statement from another person at the bookkeeper’s firm, and he tried to get her to add $2.6 million he said Manafort expected to receive later that year. When that apparently failed, he edited the document himself, adding what he testified was $6 million in income.
“Was it accurate?” Andres asked.
“It was not,” Gates responded.
“Was it false?” Andres continued.
“Yes,” Gates said.
1:05 p.m.: Gates testifies he helped Manafort massage finances to get loan
Rick Gates has now testified to helping Paul Manafort defraud banks while seeking loans in 2016 in a second way. Gates said the bank flagged that Manafort’s income was not sufficient to support the loans. To increase his income for the year, Gates testified he and Manafort agreed to have one of Manafort’s companies, Peranova Ltd., forgive a loan that had been reported as previously made to Manafort.
Essentially, in an earlier year, when Manafort wanted to show lower income for tax purposes, he falsely called the Peranova income a loan. But in 2016, when he needed to show higher income to qualify for the loan, Gates testified that they agreed Peranova would forgive the loan, resulting in the money being reclassified as income.
In fact, the loan had never been real and had never been forgiven, so Gates said he created a loan forgiveness document in February 2016 on behalf of Peranova and backdated it to July 23, 2015. That made it appear that the loan had been forgiven in the previous year. He then sent the document to accountant Cindy Laporta, with the intention that it be provided to the bank to help Manafort qualify for the loan.
Prosecutor Greg Andres went through emails exchanged between Gates and Laporta on the topic, showing each place where Manafort was copied. Andres was demonstrating to the jury that Manafort was fully involved in the plan to reclassify the loan as income and backdate the loan forgiveness document.
Before breaking for lunch, Andres told Judge Ellis that he anticipates questioning Gates for about another hour. On questioning from the judge, he said he continues to anticipate that the prosecution will rest its case against Manafort by the end of the week.
12:40 p.m.: Rick Gates says he faked mortgage documents at Manafort’s request
Rick Gates is now testifying that he gave a bank fraudulent home insurance documents at Paul Manafort’s request, so that his boss could get a loan from Citizens Bank.
Manafort had told a representative from the bank that he had no mortgage on a townhouse he owned in Brooklyn, Gates explained. But when the bank first got documents from insurance broker Donna Duggan, they showed that there was a mortgage on the home.
Manafort had bought the house with $3 million in cash, but then got loans against the property from Genesis Capital — also fraudulently, according to prosecutors.
So Gates said that at Manafort’s direction, he asked Duggan for the older insurance policy showing no mortgage on the home and sent that to Citizens Bank.
“Mr. Manafort asked me to submit the prior year’s policy,” Gates testified.
Duggan is one of four remaining witnesses who could testify under immunity from prosecution.
Gates said he also gave Citizens Bank false information about a condo Manafort owned in Lower Manhattan, saying it was a second home when it was not.
“He was looking for the most favorable terms in the mortgage interest rate,” Gates explained, and calling the rental property a second home would help.
Again, Gates said he was told by Manafort to lie to the bank.
12:25 p.m. Gates makes one of his first references to the Trump campaign
There has been no significant discussion of Paul Manafort’s work on the Trump campaign so far at the trial, which is largely by design. The charges mostly concern the period before he worked for Trump, and the parties were told to steer clear of any mention of possible collusion with the Russians, as that isn’t relevant to the case.
But Rick Gates — without using Trump’s name — referenced the campaign work Tuesday.
Gates was describing how in 2015 and 2016, Manafort’s once-lucrative work in Ukraine had dried up, and his company was in dire financial straits. He said the company, DMP International, did not acquire any new clients in 2015, and to his knowledge was not earning income in 2016.
In March of that year, Gates said, he went to work for “one of the presidential campaigns.” Manafort, Gates said, hired him. We know that campaign was Trump’s, though Gates did not say the president’s name, and there was no further discussion of that work.
But Gates did offer more description of Manafort’s company’s situation at that time. He said he was one of two employees working for Manafort in the company, which paid its bills via Manafort’s “savings and investment accounts.” He said that in 2015 and 2016, vendors with which the company had worked reached out “indicating the bills had not been paid.”
Around that time, Gates testified, Manafort began applying for loans, and Gates said he altered some documents — including a profits and loss statement — for his boss. In at least one instance, he said, he did so by converting a PDF to a word document.
12:14 p.m.: Manafort’s response to large tax bill? ‘WTF,’ Gates testifies.
Jurors have heard Paul Manafort’s accountant testify about how Manafort recorded what she believed were fictitious loans on his taxes to reduce the amount he’d have to pay the IRS. She said Manafort’s business partner, Rick Gates, was intimately involved in that effort.
On Tuesday, jurors heard Gates’s account of what happened — and how it all occurred at Manafort’s direction.
Prosecutors showed jurors a familiar 2015 email in which one of Manafort’s accountants told Gates that to reduce a tax bill Manafort was facing, they would have to claim that Manafort had an outstanding loan. Gates told jurors that he had been “tasked” by Manafort with initiating the exchange because Manafort was upset about the taxes he would have to pay.
“We needed to determine how we could lower the taxes,” Gates said.
Jurors did not just have to take Gates’s word for it. They were shown an email in which Manafort, confronted with an outline of what he might have to pay in taxes, wrote “WTF,” an expression that commonly denotes dismay. Gates said Manafort was “not happy.”
Jurors have heard that a $900,000 loan from Telmar Investments was listed on Manafort’s taxes for 2014, and Manafort’s accountant thought it was suspicious. Asked whether the $900,000 was such a loan, Gates was more explicit.
“It was not,” he said.
Asked why he had told Manafort’s tax preparers about the payment, Gates responded, “Mr. Manafort’s direction.”
11:50 a.m.: Gates: Manafort actively hid accounts
Rick Gates has resumed the stand after a midmorning break at the trial of Paul Manafort.
Gates told the jury that he helped coordinate with the accountants who prepared Paul Manafort’s taxes on Manafort’s annual filings. He said that he and Manafort would strategize how to reduce Manafort’s overall tax liability by classifying some income as loans.
He said too that he and Manafort had discussions over the years about whether Manafort’s overseas accounts needed to be disclosed. This is a key point to the prosecutors’ case because it is illegal to knowingly fail to disclose such accounts to the IRS.
Prosecutors wish to show that Manafort was not just confused but actively hid the accounts. Gates testified that Manafort would tell him that because a Cypriot lawyer they referred to as “Dr. K” has signatory authority of the accounts, he did not believe they needed to be disclosed to the professional accountants.
Prosecutor Greg Andres asked Gates who actually had control over those accounts.
“[Manafort] always had control,” Gates replied.
“And whose money was in those accounts?” Andres continued.
“Mr. Manafort’s money,” Gates replied.
The defense has argued that Manafort largely left control of his financial matters to Gates, suggesting that any financial problems were the fault of Gates, not Manafort. But prosecutors have now introduced agendas that Manafort wrote to guide conversations between himself and Gates on the phone and in person.
They included conversations about Manafort’s taxes and bills. The agendas appear to show that Manafort had active involvement in these matters.
One of the agendas included a stray reference to Trump, an indication that Yankees tickets bought by Manafort should go to Trump. The name appeared on an exhibit that was displayed in court, causing reporters’ eyes to snap to screens displaying the document around the court.
It was unclear what, exactly, the reference meant, and prosecutors did not ask Gates. Manafort owns an apartment in Trump Tower, and the reference could merely have been a direction that tickets Manafort had purchased should be sent to his Trump Tower unit.
Gates has been testifying in a clear, matter-of-fact voice. Wearing a navy-blue suit, white shirt and a sky-blue tie, he appears calm and has shed any nerves he had when he first took the stand Monday.
He carefully addresses his answers directly to Andres, keeping his eyes away from where Manafort sits at the defense table. Manafort periodically leans over to whisper to his attorneys but spends long stretches staring directly at his former business partner.
11:25 a.m.: Gates explains mystery invoices
Rick Gates explained several apparently fake invoices from vendors who did work for Paul Manafort: He created those for banks in St. Vincent and the Grenadines.
When Manafort moved his banking from Cyprus to the Grenadines, Gates explained, they required more documentation. “They asked for invoices” that had the name of the companies Manafort was using on them, Gates said. So at Manafort’s direction, he would make a “modified invoice.”
“The payment was legitimate,” he said. But “it had to have the name of the company itself” — and the vendors hadn’t provided those.
He said he took the information on the invoices from Manafort — suggesting any typos were his boss’s fault. The vendors never actually saw those invoices.
Gates said he directed wire transfers for Manafort from overseas companies to House of Bijan, Alan Couture, New Leaf Landscaping, Big Picture Solutions and other vendors. But he bought no fancy suits himself and no home renovation or upkeep services. He has never been to Manafort’s Bridgehampton home, he said.
He said Manafort directed him to make the payments and to hide them from bookkeeper Heather Washkuhn.
“The U.S. payments were reported to Ms. Washkuhn, the overseas ones were not,” he said. “It was in essence diminishing the amount of money that would have been represented on the U.S. tax returns.”
Gates also wired payments to himself — sometimes with Manafort’s authorization, sometimes not.
11:18 a.m.: Gates explains FBI interviews in 2014
Rick Gates testified that he and Paul Manafort were asked to come in for voluntary interviews as part of a joint FBI and Ukrainian “forfeiture investigation” in 2014. His understanding was that neither he nor Manafort were under investigation.
Gates said he was interviewed first and asked about their work in Ukraine. At that point he said most of their Cypriot accounts were already closed.
He said Manafort asked him to meet with Serhiy Lyovochkin to “notify him and determine the status of his Ukrainian company” because a lot of their payments came from him.
“We didn’t know a lot about” the company, Gates said. They met Lyovochkin in France, he said, and he answered their questions. He also agreed to start paying Manafort through one bank rather than through international wire transfers, Gates said.
10:57 a.m.: Gates: Manafort grew worried when his name appeared on account
Much of the prosecution’s case will hinge on its ability to connect Paul Manafort and his Ukrainian benefactors to various accounts and companies that were set up intentionally to disguise their involvement. In his early testimony Tuesday, Rick Gates connected his former boss to many of those accounts, and he pulled back the curtain on how they were created.
Gates testified that he and Manafort used a Cypriot lawyer, who he referred to in court as “Dr. K,” and that lawyer’s firm to open various accounts. The firm, Gates testified, “handled everything,” and Gates and Manafort had no interaction with the bank.
“I believe [Manafort] understood his name would not be represented, nor would mine,” Gates said.
Gates said they set up various accounts to accept payments from the Ukrainian businessmen for whom they worked. Those businessmen routed the payments through companies that similarly disguised their involvement. At one point, Gates said, when Manafort learned that his name was connected to an account, he grew concerned. Gates, too, said he asked for his own name to be removed from an account to which it was connected.
The arrangement created some challenges. Gates testified at one point the men encountered trouble with their Cyprus accounts, so they moved money — again using Dr. K’s law firm — to accounts in the Grenadines.
Importantly for prosecutors, Gates made clear that no matter the name on the accounts, they were ultimately controlled by Manafort. Jurors were shown one 2011 email in which Manafort explicitly approved a money transfer from one of the accounts to his company, DMP International. Among the charges Manafort faces is failing to report foreign bank accounts.
10:52 a.m.: Gates describes how the money dried up
The overarching narrative of prosecutors’ case is that after Ukrainian presidential candidate Viktor Yanukovych was ousted from power and Paul Manafort’s money ran dry, the political operative turned to fraud to maintain his lavish lifestyle. Rick Gates, who worked with Manafort for Yanukovych, testified about their financial woes Tuesday.
By Gates’s account, the income streams became more “difficult to come by” after Yanukovych’s ouster, and their effort to create work through a new Ukrainian political party, called the Opposition Bloc, was not completely successful. While the party won a few seats in Parliament, Gates testified it never achieved power, and sometimes it did not fully pay Manafort’s bills.
Prosecutors showed jurors an August 2015 email sent to Gates about payments from the opposition bloc, which were overdue. Manafort, Gates testified, was “upset” because their previous financial situation was “substantially decreased.”
Gates wore a blue suit, white shirt and light blue tie to court Tuesday. He continued to speak swiftly — though perhaps more confidently than he did a day earlier — and never looked at Manafort. For his part, Manafort stared at his former business partner throughout the testimony.
10:35 a.m.: Gates gives primer on shell companies
Paul Manafort’s former business partner, Rick Gates, essentially gave the jury a tutorial on the use of shell companies, walking through consultancy agreements used by Manafort during his work in Ukraine.
Powerful Ukrainian businessmen would set up a company in Cyprus and use that company to pay a different company set up by Manafort in Cyprus. But neither the businessmen nor Manafort would sign the documents governing the payments. Instead, paid Cypriot directors signed for both sides.
“Did these companies sell a product?” prosecutor Greg Andres asked Gates.
“No,” he replied.
“Did they have any employees?” Andres asked.
“No,” Gates repeated. “The purposes of the companies was to accept payments and to make payments.”
Gates walked through a series of such agreements — one directing that Manafort be paid $1.1 million, another showing that he was paid 3 million euros.
Gates told the jury that neither Manafort’s bookkeepers nor the company that prepared his taxes were made aware of the companies.
Andres also showed Gates an example of a loan agreement between two of Manafort’s Cypriot entities. Asked the purpose of the loan, Gates responded: “At the time, I believe [Manafort] was trying to decrease the amount of taxable income for that particular tax year.”
All of the testimony goes to the heart of the prosecution’s case, which alleges that Manafort accepted millions in payments through his offshore companies without disclosing the accounts to the IRS and that he disguised some income as loans to avoid paying taxes on it.
Gates then explained that Manafort’s fees rose to $4 million, then 4 million euros after Viktor Yanukovych took office and Manafort’s company served as policy advisers to his new government. But after Yanukovych lost power, Gates told the jury that Manafort’s fees began to dry up.
He said Manafort worked for a time for the Opposition Bloc, the party that replaced Yanukovych’s Party of Regions after popular protests caused Yanukovych to flee to Russia in 2014. But he said the new party was out of power, which meant it had less access to cash to pay Manafort and his team.
Gates said that Manafort’s last payment in Ukraine came in late 2014. This is key because prosecutors argue that it was the end of Manafort’s Ukrainian fees that caused him to turn to bank fraud to find revenue to support his lavish lifestyle.
10:17 a.m.: Rick Gates explains how Ukrainian billionaires paid Manafort
Rick Gates resumed his testimony Tuesday morning by explaining how and why Paul Manafort was paid for his work in Ukraine through companies in Cyprus.
“He indicated that the Ukrainian businessmen wanted us to set up Cyprus bank accounts,” Gates testified, because the Ukranian businessmen already had accounts there and could easily wire money that way.
He named wealthy politicians who paid Manafort through Cypriot accounts, including Borys Kolesnikov, who was minister of transportation in the pro-Russian Party of Regions when Viktor Yanukovych was president; and Serhiy Lovochkin, who was Yanukovych’s chief of staff.
Telmar Investments, the source of payments to Manafort, was controlled by Lovochkin, Gates testified.
Gates explained that he and Manafort would work out consultancy agreements and a payment structure with the billionaires backing the Party of Regions. Manafort or another employee, Konstantin Kilimnik, would draft an agreement that would be approved by their Cypriot law firm.
That same firm, Chrysostomides, helped set up their Cypriot bank accounts, he said.
A “Georgia Chrysostomides” signed a loan forgiveness letter Laporta testified was fraudulently drafted by Gates.
Gates also testified that some of the payments were for a “lobbying campaign in the U.S. and the U.K.” — an issue not in this case but in Washington, D.C., federal court, where Manafort is accused of failing to register as a foreign agent.
The courtroom is packed with spectators today, many of whom lined up as early as 6 a.m. to see Gates testify. Prosecutor Greg Andres said he expected to question Manafort’s business partner for another three or four hours.
9:37 a.m.: Behind judge’s clash with prosecutors, sharp opinions about special counsels
Judge Ellis has clashed repeatedly with prosecutors for Robert S. Mueller III’s special counsel throughout Paul Manafort’s trial, chastising them for introducing evidence he deems irrelevant, spending too much time on some issues and even for showing their frustration in their faces.
Ellis is never shy about telling lawyers what he thinks, but it is rare for him to so aggressively criticize prosecutors in trial. More often, his caustic remarks about wasted time and his interruptions mid-testimony come at a defendant’s expense. More than one defense lawyer has appealed to the Fourth Circuit on those grounds.
However, Ellis has made clear that he has no love for the special counsel. He told prosecutors earlier this year that “the American people feel pretty strongly about no one having unfettered power.”
While he ruled that Mueller did have the authority to bring the charges against Manafort, he added in his opinion that “the wisdom of allowing all links between individuals associated with President Trump’s campaign and the Russian government to be subject to investigation, irrespective of how stale those connections might be, is seriously in doubt.”
The latitude given to special prosecutors is an issue that has long concerned Ellis. In his opinion allowing the Manafort prosecution to go forward, despite his misgivings, he cited a 1997 judicial symposium he helped moderate called, “The Independent Counsel Process: Is It Broken and How Should It Be Fixed?”
“The longer that an independent prosecutor remains an independent prosecutor, the more likely it is that he or she becomes politicized in one way or another,” Ellis said during that conference.
He expressed similar concerns about Mueller, and was not persuaded that the special counsel differs significantly from the independent prosecutors created after Watergate and eliminated after Kenneth Star’s five-year investigation of Bill Clinton.
“To provide a Special Counsel with a large budget and to tell him or her to find crimes allows a Special Counsel to pursue his or her targets without the usual time or budget constraints facing ordinary prosecutors, encouraging substantial elements of the public to conclude that the Special Counsel is being deployed as a political weapon,” he wrote in May.
A better way to deal with Russian interference in the 2016 election, he argued, would be a bipartisan commission (something Republicans in Congress have blocked).
At the same time, Ellis noted Monday evening that the special counsel has evidence Manafort committed tax and bank fraud. The more they stick to the facts, he said — that he did not pay his taxes or report foreign bank accounts, and that he submitted fraudulent loan applications — the less he will intervene.
9 a.m.: What to expect Day 6
Rick Gates will take the stand again Tuesday, and prosecutors said they expect to question their star witness for another three hours. After that, Paul Manafort’s defense attorneys will get their turn to inquire of Gates. Factoring in breaks and lunch, his testimony could be the only that jurors hear on Tuesday.
Gates is a pivotal witness, and already, his testimony has been explosive. He conceded that he committed crimes with Manafort — crimes which he described to the FBI and prosecutors in 20 meetings to prepare for his testimony. But Gates also admitted committing wrongdoing all on his own, including embezzling hundreds of thousands of dollars from his former business partner.
For prosecutors, Gates’s testimony is key to proving that Manafort knowingly defrauded banks and the IRS and failed to file required documents. While Manafort’s accountant recently testified she believed she was submitting fraudulent documents on Manafort’s behalf, Gates can say conclusively what Manafort knew about that, and what directions Manafort gave.
For defense attorneys, Gates is an equally pivotal witness. They have essentially hinged their case on tearing him down, asserting that he committed fraud to hide his own wrongdoing, then cut a plea deal.
Whether jurors believe Gates will be critical, though the prosecution’s case does not necessarily rise and fall with his testimony. Prosecutors already have introduced emails showing Manafort was copied as some fraud seemed to be discussed, and they say they will show jurors more evidence to support Gates’s account.
Testimony resumes at 9:30 a.m.