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 8 of the trial:
• Judge T.S. Ellis III began the day by admitting he was wrong when criticizing prosecutors in front of the jury Wednesday.
• Officials from two banks testified that Manafort received seven-figure loans he wouldn’t have gotten but for false statements on his applications.
• Manafort listed, and occasionally rented, his SoHo condo on Airbnb while claiming to one bank it was his “second home.”
5:42 p.m.: Manafort got a $1 million loan after inflating income and indicating he had no other loans
Prosecutors have called Gary Seferian, a vice president with the Banc of California, from which Paul Manafort applied for a $5 million loan in 2016.
Manafort employee Rick Gates testified earlier that Manafort ordered him to alter financial documents related to an application for the loan because earlier profit-and-loss statements showed their business wasn’t making enough income to qualify. The initial application showed an income of $400,000, which Gates said he changed at Manafort’s direction to $6 million, with $4.4 million in net proceeds, and resubmitted to the bank.
Manafort sought the loan with his son-in-law at the time to flip houses in Los Angeles, Seferian testified.
Manafort eventually received a loan for $1 million from the Banc of California, Seferian said. It was the second bank to say Thursday that it had only loaned Manafort money because of phony statements on his loan applications.
In one Banc of California document, Manafort had indicated he was not a “borrower or a guarantor on a loan.” But prosecutor Uzo Asonye suggested that Citizens Bank may have recently approved a $3.4 million loan for Manafort’s Howard Street property at the time, contradicting Manafort’s representation on documents he signed and promised were “true, and correct, and complete.”
Then Asonye projected two financial documents side by side, showing net income of $400,000 and $4.4 million, to screens throughout the courtroom.
“If you had learned that the net income in 2015 for DMP International was approximately $400,000 … would that have affected the bank’s analysis of the loan?” Asonye asked Seferian.
“Yes, it would have,” Seferian responded.
“Would Mr. Manafort have qualified for this loan?” Asonyne continued, noting the bank had considered an application saying DMP International made more than $4.4 million, as opposed to $400,000.
“I don’t think so,” Seferian said.
Asonye then walked Seferian through other items the bank had found that reduced what Manafort did qualify for. Initially, Seferian said, Manafort applied for a $5 million, but after the bank learned he had claimed to own a home that actually belonged to his wife, they reduced the amount to $1 million.
“I was comfortable at that point,” Seferian testified.
But Seferian made clear that was in part because of the profits he thought were coming from DMP International. Without that income, Seferian testified, the bank would have assessed that Manafort could not have both paid the bank back and covered his living expenses.
“I believe that he would not have qualified,” Seferian said.
The trial has ended for the day.
3:58 p.m.: Then Manafort applied for another loan, and was turned down
After an afternoon break, Citizens Bank loan officer assistant Taryn Rodriguez took the stand to describe for jurors another loan Paul Manafort applied for — and apparently didn’t get.
Rodriguez testified that Manafort applied for the loan, a $5.5 million construction loan on a property on Union Street in Brooklyn, just 30 to 45 days after he successfully got a loan from Citizens Bank in 2016. Rodriguez said she simply entered the information from that previous loan application – which previous witnesses have described as being faulty – for the new loan.
But Rodriguez said she also did her own digging to check the accuracy of the application, searching tax records and other databases to see whether there were any loans against the Union Street property. She learned there was one, for more than $1 million, that Manafort had not disclosed.
Rodriguez said that information was “very important” to the bank. “We need to know what needs to be paid off,” she said. She said it was “very unusual” for such a loan not to be disclosed, and she notified the loan officer for whom she worked. Manafort ultimately never got the loan.
If Manafort had disclosed the loan against Union Street, it would have had to have been paid off, or it could have lowered the cash he would have received in applying for the construction loan, Rodriguez testified.
Rodriguez testified that Manafort also had not disclosed another loan for more than $1 million he had received from the Banc of California.
“That’s information the bank would want to know,” she said in response to a question from prosecutor Uzo Asonye.
Rodriguez testified that it was Manafort himself who sent the bank a letter from accountant Cindy Laporta claiming a $1.5 million loan from Peranova Holdings had been forgiven in 2015, upping his income.
The bank got a profit-and-loss statement showing Manafort made $1.76 million by mid-2016, Rodriguez testified, after Manafort had emailed Rick Gates about loan documents and said, “I need this done.”
She said the bank also got a letter from Manafort himself claiming that when construction was done the Brooklyn brownstone in the Carroll Gardens neighborhood would be his “primary NY residence” and his daughter would move into his SoHo condo.
Judge Ellis questioned the importance of this testimony given that Manafort did not actually get the construction loan.
“You might want to spend time on a loan that was granted,” he said as Asonye finished.
3:03 p.m.: Banker: Manafort should not have gotten the loan he got
Paul Manafort would not have gotten a $3.4 million loan in March 2015 against his lower Manhattan condo if the bank had known the property was a rental rather than a second home, Citizens Bank Vice President Peggy Miceli said.
“The loan was way over the maximum” for an investment property rather than a home, she said, which is $1 million. Special exceptions can be made but there’s a process for that, Miceli testified, She could not recall the maximum loan ever given for an investment property but said, “it’s not a lot.”
The loan Manafort got also allowed him to take cash out from the bank, and Miceli testified that was not allowed for loans against investment properties.
If the bank had known Manafort had said on his taxes that the property was available for rent all year, she said, “We would determine it was an investment property.”
She said the bank would also want to know if a letter indicating a $1.5 million loan to Manafort from Peranova Holdings was forgiven in 2015 — adding to his cash flow — had been written in 2016 and backdated.
“Yes,” she said. “We would question it.”
On cross-examination, defense attorney Jay Nanavati asked if it would be “better” if the bank knew Manafort “controlled” the entity that had loaned him $1.5 million.
Of course, it is prosecutors who have alleged that Manafort controlled Peranova Holdings and stashed money there to avoid taxes.
“Not necessarily,” Miceli replied. “We would want to see the business tax returns” for the other entity.
Finally, Nanavati asked if Miceli was aware that her own bank had partnered with Fannie Mae and Airbnb on a program that lets people use income from the website to refinance their mortgages. She said she was not.
That program started this year and applies only to Airbnb hosts who list their primary residence on the site for short-term rentals.
2:03 p.m.: Manafort lawyers note you can still live in a place you rent on Airbnb
In his cross examination of Darin Evenson, the former Navy SEAL who now runs “customer experience” at Airbnb, defense attorney Jay Nanavati sought to show that Paul Manafort’s Howard Street property in lower Manhattan could still have been a residence, no matter its listing on the website.
Nanavati asked Evenson if those who list properties on Airbnb consider them their primary residences.
“In most cases,” Evenson responded, “it is their primary residence.” He said Airbnb data shows that 73 percent of properties listed are the hosts’ primary residences.
Nanavati then pointed to the listing itself to show that Manafort’s son-in-law, who rented the property, seemed to treat it as a residence. The description said the host or a friend would be available to help those renting the property with problems, and the “House Rules” said only, “As you would expect me to behave in your home.”
Nanavati asked Evenson if the property was rented for just five days in 2016, and 77 days in 2015. Evenson said he could not immediately confirm that without examining his records.
The testimony is important because prosecutors are attempting to prove that Manafort committed bank fraud when he claimed in bank documents the Howard Street property was not a rental.
Prosecutor Uzo Asonye ended his questioning of Evenson by confirming with the executive that people can list their rentals on other sites, not just AirBnB. So even if the Howard Street property was only actually rented for just five days in 2016 or 77 days in 2015, it could have been available or rented through other businesses.
Evenson’s testimony was followed by Peggy Miceli, a vice president of Citizens Bank.
Miceli’s testimony will likely be used to bolster the testimony of the day’s first witness, Melinda James, who is a mortgage loan assistant for the same institution.
Prosecutors have accused Manafort of falsifying financial information — allegedly lying about whether he had a rental property or had a mortgage out on another property — with Citizens Bank to secure a $3.4 million loan.
“We want all truthful information,” Miceli testified when asked about whether borrowers are expected to provide accurate information on their loan applications or possibly face criminal consequences.
In his questioning, Asonye is again reiterating that it would be important for a bank to know of someone’s outstanding debts or whether they own rental property because it would impact whether they receive a loan.
If someone has a rental property, a loan’s interest rate would be higher and the maximum loan available would be lower. It would also be considered a higher-risk loan, Miceli testified.
In the middle of requesting refinancing of Manafort’s Howard Street property, which prosecutors argue is a rental and defense lawyers say was a second home, it appeared that Manafort might not have qualified at one point.
In a calculation of his debt and income, Micili wrote in an email to a colleague that “The business did not have the liquidity to dispense these $’s.”
When Asonye asked what Micili had included at the end of her sentence, she said, “A sad face emoji,” prompting laughter in the courtroom.
Darin Evenson, a 22-year military veteran and former Navy SEAL commander who now runs “customer experience” at Airbnb, testified that from January 2015 through April 2016 Paul Manafort’s condo on Howard Street in Manhattan’s SoHo district was almost always available to rent through the website.
Prosecutors showed a few examples of reservations for the property, advertised as “Amazing full floor loft in SoHo.”
A pair of guests spent $1,971 to spend four nights in the loft in January 2015. Five guests paid $16,325 to stay there for 21 nights that June.
Evenson testified that the loft was available for 1,125 nights in a row, the maximum number allowed on Airbnb.
There were two breaks when the listing was taken down, he said. The first was from Oct. 27, 2015 through Nov. 20, 2015.
The second was from Feb. 26, 2016 to March 26, 2016 when, as others have testified, Manafort was negotiating a loan against the property and claiming it as a “second home.”
Cross-examination of Evenson will start at 1:30 p.m., after the lunch break.
12:12 p.m.: On fraud charge, Manafort lawyers try to sort out his statements to bank while seeking loan
In his cross examination of mortgage loan assistant Melinda James, defense attorney Jay Nanavati sought to cast blame on Paul Manafort’s onetime associate, Rick Gates, for the inaccuracy of Manafort’s loan application to Citizens Bank.
Nanavati first sought to demonstrate that the process for obtaining a loan is a lengthy one, and a person’s finances can evolve during that time. He showed James an email from Manafort in December 2015 providing some information to Citizens Bank about the loan he wanted. Manafort did not close on the loan until March of the following year.
Prosecutors have shown evidence that Manafort misled the bank in applying for that loan, particularly by claiming that other properties he owned were free of mortgages.
As prosecutors questioned her, James testified that she was tipped to a possible mortgage on another property, located on Union Street in New York, because of insurance documentation. She testified that Gates told her the other property did not have a mortgage because Manafort had elected not to go through with it.
Nanavati pointed to an email that showed Manafort actually told James on Feb. 24, 2016, that a mortgage had just been “approved” on the Union Street property. That was after James had received the insurance documents and raised questions about why Manafort had initially told the bank the Union Street property did not have a mortgage.
Under Nanavati’s questioning, James testified that Gates called her later that day and told her he and Manafort were “not moving forward” with the mortgage on the Union Street property. She seemed to reconcile that with what Manafort had told her earlier because she assumed the word “approved” meant Manafort was in the process of shopping around for mortgages on the Union Street property and had received an initial go-ahead from a bank. In fact, he had closed on a mortgage there.
The FBI seemed to have a report of James telling them that Gates told her the Union Street mortgage had been paid off, but James testified that was not her recollection of her conversation with the FBI. That could be an important detail later, if Manafort’s defense attempts to question the accuracy of statements the FBI collected.
James testified that after her call with Gates on Feb. 24, 2016, Gates sent her more insurance documentation, which did not list a mortgage on the Union Street property. That documentation, though, was older than what she had seen previously. James testified she did not notice that at the time.
In the final minutes of James’s testimony, Nanavati again sought to lay blame for any discrepancies with Gates.
“When he’s unreachable, Rick Gates is the person to deal with, correct?” Nanavati asked James.
“Correct,” James testified.
James had understood, based on an email from Manafort, that there was a mortgage closing on the Union Street property in Brooklyn. But that changed after a call from Gates and subsequent emails. In the messages, Gates told James there would be no mortgage on Union Street, she testified.
The call from Gates is when “things went off the rails, correct?” Nanavati asked James about the confusion over the mortgage.
“If you want to call it going off the rails,” James said.
At the close of James’s testimony, prosecutors tried to reinforce that even if Gates sent conflicting information about the Union Street mortgage, it was Manafort who signed all papers confirming the accuracy of the paperwork provided to secure the loan. Manafort was copied on all the emails Gates sent and had ample opportunity to correct any discrepancies on those messages or at closing, Assistant U.S. Attorney Uzo Asonye established with James.
“What’s the purpose of having people sign the documents at closing,” Asonye asked.
“To confirm the information is correct,” James said.
Asonye also revived a previously shown email between Manafort and his son in law, highlighting that Manafort knew the property was being rented out. The message was telling his son-in-law that the appraiser was coming and needed access to the property on Howard street.
“Remember, he believes that you and Jessica are living there,” Manafort wrote.
After James finished her testimony, Darin Evenson, an executive with rental site Airbnb took the stand. Prosecutors have accused Manafort of listing his properties for rent on Airbnb.
After testifying that Paul Manafort falsely claimed a condo he rented out in Lower Manhattan was a second home, Citizens Bank mortgage loan assistant Melinda James said he also lied about whether there was a mortgage on a townhouse he owned in Brooklyn.
James said that in emails Manafort indicated he owned the Carroll Gardens home “free and clear,” but insurance declarations showed a mortgage on the property. James said that in conversations and emails with Manafort’s employee Rick Gates, she was made to understand that a loan against the property had been approved but not finalized.
Manafort was copied on those emails.
Gates sent her a new email, again copying Manafort, showing there was no mortgage on the property and attaching insurance documents “reflecting the correct information.”
The policy attached was actually older than the one James originally saw, but she said she did not realize that at the time.
She said Manafort signed a loan application in March, affirming there was no mortgage on the house.
As part of the negotiations, James said Citizens Bank also got documentation from Manafort’s accountant saying a $1.5 million loan from Peranova Holdings Ltd. had been forgiven.
That accountant, Cindy Laporta, has testified that she believed the loan forgiveness letter was fabricated.
Defense attorney Jay Nanavati’s cross-examination of James had only just begun when Judge Ellis announced a 20-minute break. Nanavati said outside the presence of the jury that on cross-examination he plans to argue that when Manafort started negotiating with Citizens Bank for the Brooklyn loan, there was no mortgage on the property.
10:37 a.m.: Documents show Manafort claimed Manhattan property was a ‘second residence’ in obtaining $3.4 million loan
With their first witness of the day, prosecutors sought to detail how Paul Manafort defrauded Citizens Bank — obtaining a $3.4 million loan in part by falsely claiming a property he owned in New York was a second residence, rather than a rental property.
Mortgage loan assistant Melinda James, who works at Citizens Bank, described for jurors how in 2016 Manafort sought what is known as a $3.4 million cash-out refinance on a property he owned on 29 Howard St. in Lower Manhattan. What that means, James testified, is Manafort was essentially seeking to refinance so he could get cash for the equity in the property.
As he questioned James, Assistant U.S. Attorney Uzo Asonye flashed for jurors the mortgage documents Manafort signed and emails Manafort wrote attaching documents to support his loan application. That is important because defense attorneys have sought to cast blame for the fraud of which Manafort is accused on his business partner, Rick Gates.
For this particular loan, jurors saw emails demonstrating Manafort’s direct involvement. James testified that Manafort told her she could talk to Gates if Manafort himself wasn’t available, but she typically copied Manafort on emails, because the loan was for him.
Asonye repeatedly flashed instances in which Manafort affixed his signature to passages asserting that the information he was submitting was accurate, and that if he had knowingly provided something that was false, he could face civil or criminal penalties. On the documents, Manafort said the 29 Howard Street property was a “secondary residence” that generated no rental income.
James testified that though all the applications Manafort submitted indicated his property on 29 Howard St. was a second residence, her research indicated otherwise. She said that as she was processing the loan, she went to a website called StreetEasy to confirm the address.
“It was listed for rent,” James testified.
In addition to flashing documents showing Manafort signed papers falsely declaring the property was a second residence, prosecutors presented emails and correspondence from Manafort to show he had direct knowledge of the fraudulent transactions.
For example, Manafort emailed Citizens Bank on Jan. 21, 2016 to ask about the status of the loan.
“Has the appraisal been ordered? . . . What are the next steps,” Manafort wrote.
“Our research shows that the property was listed for rent (which it cannot be),” James’s boss wrote in a reply and requested additional documents.
In later correspondence, Manafort listed a lease agreement for the property that indicated his daughter and her husband at the time lived at the residence. In a Feb. 2, 2016, letter justifying why he was applying for the loan, Manafort said the Howard Street property “is used as a second home for us.”
Prosecutor Uzo Asonye, however, alluded to a 2015 tax return, in which the property was listed as a rental that generated about $100,000 in income.
James testified that had Manafort listed the Howard Street property as a rental, it could have impacted the outcome of his loan application.
U.S. District Judge T.S. Ellis III has raked prosecutors from the special counsel’s office over the coals for the past week and a half. But on Thursday, he backed down, telling jurors to ignore one piece of criticism.
“I was critical of counsel for … allowing an expert to remain in the courtroom,” he said before testimony began. “You may put that aside… I may well have been wrong.”
On Wednesday, Ellis scolded prosecutors for calling an IRS expert who has sat through the trial in the gallery. Prosecutors filed a motion Thursday morning pointing out that the transcript backed up their understanding that Ellis had explicitly allowed the expert to do so.
“The Court’s sharp reprimand of government counsel in front of the jury on August 8 was therefore erroneous,” the prosecutors wrote. “And, while mistakes are a natural part of the trial process, the mistake here prejudiced the government by conveying to the jury that the government had acted improperly and had violated court rules or procedures. The exchange could very well lead the jury to reach two erroneous inferences: (a) that Mr. Welch’s testimony is not credible because he was improperly privy to the testimony of other witnesses, and (b) that the government sought to secure an unfair advantage by secreting its expert in the courtroom without permission . . . This prejudice should be cured.”
Ellis said Thursday that he had not actually read the transcript, which was attached to the government motion.
But, the judge said, “I was probably wrong.”
He added that he makes mistakes, “like any human — and this robe doesn’t make me any more than a human.”
He concluded, “Any criticism of counsel should be put aside — it doesn’t have anything to do with this case.”
Prosecutors then called their first witness, Melinda James. She said her name was previously Melinda Francis. According to emails already produced in court, Francis works at Citizens Bank.
9:25 a.m.: Thoughts on the Manafort jury, so far
As prosecutors near the end of their case, they likely have one question on their minds: What does the jury make of all of this? In their body language, the panel of six men and six women have offered few clues. But after observing them for the past two weeks, here’s what we can say:
1. They’re observant.
Many of the jurors have diligently taken notes throughout the proceedings, peering down into small monitors in front of them to scrutinize bank and tax documents. Even as the testimony turned from luxury suits and extramarital affairs to flow charts and accrual-based accounting, most, though not all, continued to listen intently to the witness and scribble in their court-provided notebooks. A few times, jurors rubbed their eyes during the wonky testimony — but that is probably to be expected given the subject matter.
2. They’re respectful of the judge
Judge T.S. Ellis III asks the jurors before court begins each day whether they were able to follow his instructions and not discuss the case with anyone. Some of the jurors respond loudly, “Yes, judge” or “Yes, your honor.” When Ellis makes jokes — and he has done so frequently throughout the proceedings — many of the jurors laugh vigorously. Even some bits he repeats — for example, telling jurors he hopes their lunch was “adequate” — have continued to draw chuckles from the panel.
3. They’re friendly with one another — for now
During the first week of the trial, the jury asked to bring in a birthday cake, apparently to celebrate one of their birthdays. On Wednesday, the group could be heard laughing loudly just before entering the courtroom. In the second week of the trial, the jurors seem to have developed some a friendly rapport — though they have been instructed not to discuss the case, so any divisions in how they feel about the case presumably have yet to be exposed.
9:05 a.m.: Bring in the bankers
Wednesday’s testimony was focused on the tax fraud allegations against Paul Manafort. Based on the witnesses prosecutors have said they intend to call, Thursday will focus on the bank fraud they say he turned to after his Ukraine political work dried up.
Prosecutors say Manafort fraudulently secured more than $20 million dollars in bank loans by falsely inflating his income and failing to disclose debts. His former accountant Cindy Laporta has already testified that she participated in that fraud, as did his ex-employee Rick Gates. Prosecutors have pointed to an email in which Manafort sends to one bank a profit-and-loss statement his bookkeeper testified was inaccurate. Gates testified that he sent other falsified documents at Manafort’s request, and Laporta said she made false representations to banks after conversations with Manafort and Gates.
The last witness prosecutors called Wednesday before running out of time was Darin Evenson, who works at Airbnb according to his LinkedIn profile. Manafort is accused of falsely claiming a property he rented out on Airbnb was his second home to get a better rate on a loan.
Other witnesses yet to be called include several bank representatives, including two who were given immunity from prosecution. Those two potential witnesses come from Federal Savings Bank, whose CEO and chairman overlooked Manafort’s fraud in hopes of getting a job in the Trump administration, according to prosecutors from the Special Counsel’s Office.