Paul Manafort’s longtime bookkeeper testified against him Thursday, telling a Virginia jury that his seven-figure lifestyle lasted until about 2015 when the cash ran out, the bills piled up and he and his business partner began trying to fudge numbers to secure loans.
The dry but potentially damaging testimony from the bookkeeper, Heather Washkuhn, appeared to undercut Manafort’s defense against bank and tax charges, which is that his business partner is responsible for any financial misdeeds. But Washkuhn testified that Manafort approved “every penny.”
Washkuhn spent hours on the witness stand, describing account balances, bills received and payments. Her testimony is critical to the case being heard by a six-man, six-woman jury in Alexandria, Va., as Manafort, who was then-candidate Donald Trump’s campaign chairman for a period in 2016, is charged with running a years-long scheme to hide millions of dollars from the Internal Revenue Service, and then, when his income dried up, lying to get bank loans so he could continue living the good life.
Washkuhn characterized Manafort as a “very knowledgeable” client. “He was very detail-oriented. He approved every penny of everything we paid,” she said.
That point could prove vital in jury deliberations because Manafort’s lawyers have made clear they aim to place blame on the case’s star witness, former Manafort right-hand man Rick Gates, portraying Gates as a liar and embezzler who is responsible for any financial chicanery the FBI uncovered.
On the witness stand, Washkuhn said she prepared ledgers for Manafort’s finances, which she would eventually hand off to his accountants to file his tax returns. She said she sometimes saw transactions in those accounts from other accounts to which she did not have access.
Critically, Washkuhn testified that she did not have any records of foreign accounts controlled by Manafort and had not been aware of such accounts. Prosecutors have introduced evidence that Manafort used foreign accounts to pay millions of dollars for clothes, cars, real estate and home remodeling.
Prosecutors allege that Manafort made $60 million between 2010 and 2014 while working for various interests in Ukraine and used foreign accounts to hide millions of dollars from the IRS.
Washkuhn said Manafort’s consulting firm, Davis Manafort Partners, took in millions of dollars a year before its revenue cratered in 2015. The firm reported only $388,542 in income in 2015 and a $1.2 million loss in 2016.
Prosecutors say that is because Manafort’s biggest client — what one associate called his “golden goose,” Ukrainian President Viktor Yanukovych — fled for Russia in 2014 amid massive protests against his government.
As his business was gasping, Manafort was tapped to run Trump’s campaign in mid-2016. He received no pay for the job, even though his firm was losing hundreds of thousands of dollars a month, according to election filings and evidence presented to the jury.
Trying to pay Manafort’s bills became a problem, Washkuhn testified, and he needed more than $1.1 million to pay off credit cards and other expenses.
“$120K is urgently needed for your personal bills,” Washkuhn wrote to Manafort in one email presented in court. Manafort’s company also was struggling to pay its bills. In an email to Gates in April 2016, Washkuhn warned that the firm’s health insurance was going to be canceled because the bill had not been paid.
Washkuhn’s testimony is important not just for the tax charges against Manafort but also for the bank-fraud counts.
Prosecutors allege that Manafort engaged in a scheme to doctor documents submitted to banks, wildly overstating his firm’s 2015 revenue.
After being shown paperwork submitted to two banks indicating Davis Manafort Partners made $4.5 million that year, Washkuhn testified that was “four million more than what was reported on the documents that we created.”
Prosecutors allege that Gates altered the document before it was sent to banks, and they showed jurors messages they said detailed an effort to inflate income.
According to the messages, early in the morning of March 16, 2016, Gates asked Washkuhn to send him a Microsoft Word document version of the previous year’s financial records, rather than a scanned PDF. Word documents can be edited; scanned PDFs cannot be so easily changed. Washkuhn replied to Gates that she could not comply with his request.
After a back-and-forth, Gates then asked her to add $2.6 million in “accrued revenue” for 2015, something he said in a previous email Manafort had requested. She said she could not because the firm operates on a cash basis, recording money when it comes in rather than when it is earned.
Gates then emailed another employee at the bookkeeping firm, Laura Tanner, and, “per my email with Heather,” told her to add the $2.6 million to the 2015 income.
It is unclear what Tanner did. But prosecutors showed jurors an attachment Gates sent to Banc of California. “It is similar in some respects” to the Davis Manafort Partners financial statement prepared by the bookkeeping firm, Washkuhn testified, but she said the disclaimer was missing, the font was different, and “the numbers are different.”
Manafort’s lawyer Thomas Zehnle tried to show that Gates played an important part in any financial misdeeds, getting Washkuhn to concede that Gates had authority to direct wire transfers from overseas.
Gates “handled a lot of the business affairs,” Washkuhn said.
But later, the line of questioning seemed to backfire on the defense. In response to questioning, Washkuhn said Manafort kept a tight grip on financial decisions for the firm and himself.
“He approved every expenditure on the personal and business side,” Washkuhn said.
Before the bookkeeper’s testimony, jurors heard more details of Manafort’s expensive tastes.
The owner of a landscaping company in the Hamptons testified that he charged Manafort about $450,000 for landscaping over the years, to maintain the grounds of a one-acre property in Bridgehampton. The lawn featured red flowers in the shape of the letter “M.”
Manafort also spent $20,339 for a video and karaoke system at that house, but that cost was dwarfed by his bills for television and home entertainment systems for his homes on the East Coast, which totaled more than $2.2 million, according to a witness, Joel Maxwell, who said the work was paid for with wire transfers from foreign financial accounts.
On Wednesday, witnesses testified that Manafort spent more than $1 million on business suits and luxury clothes over five years.
The testimony about Manafort’s high-priced purchases has angered the trial judge, T.S. Ellis III, who said Thursday morning that he would not let prosecutors “gild the lily” by asking witnesses to explain in detail Manafort’s spending.
“All the evidence of the fancy suits really is irrelevant and besmirches the defendant,” Ellis said. “It engenders some resentment.”
Prosecutors had filed a motion in the morning asking to be given more leeway in explaining Manafort’s purchases, arguing that doing so was essential to showing the jury evidence that the foreign accounts used to pay for those luxury items were under Manafort’s control. They also said they needed to show Manafort’s profligacy to explain why he would resort to bank fraud when his business foundered.
Although he has been tough on prosecutors at the trial, the judge has been pleasant to the jurors, giving them permission to take a cake to the jury room Friday for what apparently is the birthday of a juror.
Prosecutors also said Gates, the key witness in the case, could testify as early as Friday.
Gates pleaded guilty this year to lying to the FBI and conspiring against the United States, and he agreed to cooperate against his former boss and partner in hopes of receiving a lighter sentence.
Matt Zapotosky contributed to this report.