Paul Manafort was using fraudulently obtained loans and tax-cheating tricks to prop up his personal finances as he became chairman of the Trump campaign in 2016, according to a new 32-count indictment filed against him and his business partner Thursday.
The indictment ratchets up pressure on Manafort and his deputy, Rick Gates, who were already preparing for a trial in the District that could come later this year on fraud and money-laundering charges.
The additional charges had been expected in special counsel Robert S. Mueller III’s prosecution of Manafort and Gates. Manafort joined the Trump campaign in March 2016 and was campaign chairman from June to August of that year. Gates also served as a top official on Trump’s campaign.
Mueller accused the men of lying on their income-tax returns and conspiring to commit bank fraud to get loans. The indictment was filed in federal court in Virginia — a technical requirement because that was where the accused filed their tax returns.
A court filing indicates that prosecutors initially sought to combine the new charges with the preexisting indictment in federal court in Washington, but Manafort declined to agree, leading to the possibility of separate trials in neighboring jurisdictions.
The new indictment offers a more detailed portrait of what prosecutors say was a multiyear scheme by Manafort and Gates to use their income from working for a Ukrainian political party to buy properties, evade taxes and support a lavish lifestyle even after their business connections in Kiev evaporated.
“Manafort and Gates generated tens of millions of dollars in income as a result of their Ukraine work. From approximately 2006 through the present, Manafort and Gates engaged in a scheme to hide income from United States authorities, while enjoying the use of the money,” the indictment charges.
Manafort is innocent of the new charges, his spokesman Jason Maloni said in a statement Thursday.
“The new allegations against Mr. Manafort, once again, have nothing to do with Russia and 2016 election interference/collusion,” the statement said. “Mr. Manafort is confident that he will be acquitted and violations of his constitutional rights will be remedied.”
A lawyer for Gates did not comment on the indictment.
“This is pretty raw criminality,’’ said Patrick Cotter, a former federal prosecutor now in private practice in Chicago. “According to the indictment, these are two fellows on a multiyear tear of lying to every bank they could find about their income. To a federal prosecutor, it’s fairly crude. It’s extensive and bold and greedy with a capital ‘G,’ but it’s not all that sophisticated.”
Cotter said there was one hero in the special counsel’s tale — a bookkeeper who refused an alleged request by Gates to falsely inflate a revenue claim.
Cotter added that the indictment suggests serious risk for the defendants — if convicted at trial, given their ages and the millions of dollars in alleged fraud, they could be facing de facto life prison sentences.
The indictment says that from 2006 to 2015, Manafort, with help from Gates, avoided paying taxes on income from Ukraine by disguising it as loans from offshore corporate entities, and by using foreign bank accounts to make payments to businesses in the United States on Manafort’s behalf.
According to the indictment, Manafort’s Ukraine income dwindled in 2015, and the scheme took on a new form — getting $20 million in loans based on Manafort’s real estate properties in the United States. But to do that, the grand jury charged, he and Gates made false claims to banks about their company’s income and existing debts.
The indictment describes one bank employee conspiring with Manafort in the fraud. In spring 2016, the indictment says, that unidentified co-conspirator wrote that a document looked doctored and asked them to “do a clean excel doc” and send that instead.
When Manafort joined the Trump campaign as an adviser in early 2016, he agreed to work with no pay, pitching his ability to work free as a point of particular appeal for Trump, who was notoriously stingy and also valued people who appeared to be wealthy.
In fact, prosecutors alleged Manafort was taking out multimillion-dollar loans in those same months, including $5.5 million that he sought in the same month he joined the campaign.
Another detail in the indictment suggests that Manafort was under significant financial pressure even as he ascended to the top of the Trump campaign in mid-2016. One bank lender “questioned Manafort about a $300,000 delinquency on his American Express card, which was more than 90 days past due. The delinquency significantly affected Manafort’s credit rating score.”
In response, according to the indictment, Manafort got Gates to write a letter falsely claiming that he, not Manafort, had borrowed the card to make the purchases and would pay him back.
The new charges also claim both men continued the conspiracy even as FBI agents and federal prosecutors were breathing down their necks.
Manafort and Gates were hit with a 12-count indictment in October — the first criminal charges in Mueller’s probe of Russian interference with the 2016 election. That indictment focused not on events in the 2016 race but financial transactions involving work by Manafort and Gates for the Ukrainian political party, and their failure to notify U.S. authorities that they were acting as lobbyists for a foreign government.
On Oct. 25, 2017 — just days before the first indictment was revealed — Gates submitted a false tax document for the 2013 tax year, according to the new charges. And both men were charged with a bank fraud conspiracy involving a $9.5 million loan that investigators said continued even after that indictment was unsealed.
The filing Thursday comes at a time of significant uncertainty about when a trial might happen in the first case, or even who the defense lawyers will be. Last week, U.S. District Judge Amy Berman Jackson criticized both sides for what she called “unacceptable delays” in the case, which still does not have a trial date.
Gates’s legal strategy and defense team are still unclear. Three of his lawyers had asked to leave the case, a request the judge granted Thursday. The details of his issues with his lawyers have not been described publicly, beyond a court filing that said they involve “highly sensitive matters” that would “potentially be prejudicial to [Gates] as well as embarrassing.”
Shortly after Thursday’s indictment was filed, a new lawyer, Thomas C. Green, filed notice with the court that he is now representing Gates.
Green is an experienced white-collar attorney with a reputation for cutting plea deals on behalf of his clients.
On Tuesday, an associate of Gates pleaded guilty to lying to the FBI in the course of the Russia investigation. Alex van der Zwaan, a lawyer, admitted to lying about his contacts with Gates and is awaiting sentencing.