AP Reporter Chad Day says the testimony of Rick Gates on Monday in the fraud trial of Paul Manafort is “pivotal” because the court will hear a first-hand account from a coconspirator describing crimes committed by Manafort. (Aug. 6)
ALEXANDRIA, Va. – Paul Manafort’s attorneys took direct aim at the credibility of the government’s star witness in the fraud trial of the former Trump campaign chairman Tuesday, confronting Rick Gates with millions of dollars in questionable expenses that in part financed a secret relationship with a mistress in London.
Gates, who provided about five hours of testimony against Manafort, acknowledged that he might have submitted personal expenses for payment by Donald Trump’s inaugural committee, where he worked after leaving Manafort’s firm in March 2016.
“It’s possible,” Gates said, responding to his billings for work during inauguration preparations.
Gates admitted siphoning hundreds of thousands of dollars from Manafort’s firm, including padding expenses. During that time, Gates said Tuesday, he was involved in a relationship in London and used firm money to pay for a residence and travel throughout Europe.
Earlier Tuesday, Gates outlined an elaborate operation he and Manafort allegedly structured in Cyprus to use shell companies to secretly accept millions of dollars for their work in Ukraine. He said much of the money was later routed to the USA.
During his second day of testimony in Manafort’s bank and tax fraud trial, Gates said Manafort engaged a Cypriot law firm and assigned members of that firm as ghost directors of the shell companies to hide Manafort’s association with the entities.
The law firm’s director was known to Manafort and Gates as “Doctor K,” who assisted in setting up a web of bank accounts in Cyprus, which were tapped to pay construction contractors, custom tailors and other vendors to support Manafort’s lavish lifestyle in the USA, Gates said.
Gates testified that “Doctor K” schooled them on how to shield their operations from scrutiny so the money could not be tracked by tax authorities.
At Manafort’s direction, Gates testified, their firm’s bookkeepers were not told of the accounts or the millions of dollars that passed through them.
Often, Gates said Tuesday, he would create phony invoice documents to wire payments to the USA to settle Manafort’s personal accounts.
“Mr. Manafort said we did not have to notify (the bookkeeper) of the payments,” Gates said.
Gates, who pleaded guilty this year to conspiracy and lying to the FBI in exchange for his testimony, delivered the most damning testimony against his former boss so far.
Manafort, seated at the defense table, arms crossed, often glared at his former top assistant.
Gates appeared to avoid eye contact, answering prosecutor Greg Andres’ questions in a spare but matter-of-fact manner.
As Manafort’s top aide, Gates was aware or had access to all of his boss’s holdings. He said much of Manafort’s income declined in 2015 after his primary client, Viktor Yanukovych, lost power as president of Ukraine.
The regime change prompted Manafort to scramble for income, mostly by seeking loans against some of the seven homes he owned in the USA.
At the time Manafort joined Republican candidate Trump’s campaign in 2016, Gates said their consulting company had no clients and had unsettled debts. Gates said Manafort paid Gates’ salary from savings and investment accounts.
As the pursuit of new streams of money became more urgent, Gates said, he falsified the firm’s financial statements to support mortgage loan applications – converting loans to income or falsely classifying a home as a second residence to bolster the firm’s position.
All of it, Gates said, was done at Manafort’s request.
In one case, Gates said he converted a $1.5 million loan to income in 2016 to improve his firm’s application for a new mortgage loan.
Gates said the $1.5 million was never a loan in the first place. It was actual income that was fraudulently classified as a loan from one of Manafort’s own shell companies in Cyprus to reduce Manafort’s tax liability, he said.
Nevertheless, Gates said, he created phony back-dated documents from the shell company to Manafort’s consulting firm, documenting that the debt had been forgiven.
The fake documents were submitted to Citizens Bank to support the newly sought mortgage loan.
“It was a letter from Manafort to Manafort?” Andres asked Gates, referring to the reclassification of the $1.5 million.
“Yes,” Gates said.
Around the same time, Gates said, he purposely misled bankers by submitting dated 2015 home insurance policy information to show that Manafort owned his Brooklyn row house outright.
The more current 2016 policy showed a mortgage loan.
“Did you know it was false?” Andres asked.
“Yes,” Gates replied.
After about four hours Tuesday, the government completed its questioning of Gates but not before eliciting the first mention of Manafort’s work as chairman of the Trump campaign in 2016.
Gates testified he moved with Manafort to the campaign in March 2016 to work and remained to assist with the inauguration.
Manafort departed in August as questions swirled about his association with Ukraine.
During his work for the inauguration, Gates said, Manafort’s financial condition worsened.
He testified that in late 2016, Manafort asked Gates to sign a letter taking responsibility for debts related to season tickets for the New York Yankees.
Manafort, Gates said, asked him to affirm that he had borrowed Manafort’s credit card to make the ticket purchase.
Gates estimated the tickets cost $210,000 to $225,000.
But defense attorneys pushed back Tuesday in several tense exchanges, repeatedly pressing for a more precise accounting of Gates’ unauthorized withdrawals from Manafort’s foreign holdings.
“I was living beyond my means,” Gates told Downing. “I regret it.”
Unsatisfied, Manafort attorney Kevin Downing demanded details on how much was spent on his “secret life” in London.
“It’s not a secret,” Gates replied. “My wife is (now) aware.”
Downing also took issue with Gates’ characterization of his expense padding as “unauthorized.”
“What difference does it make?” Gates said.
“It want you to call it embezzlement,” Downing snapped.
“It was embezzlement from Mr. Manafort,” the witness conceded.
Downing also seized in Gates’ earlier concessions to the government that he falsified loan documents and concealed information from accountants at the direction of Manafort.
“Do you expect this jury to believe you?”
“Yes,” Gates responded. “I’m here to tell the truth. Mr. Manafort had the same path; I’m here…I’m trying to change.”
The case against Manafort – 18 criminal counts of tax evasion, bank fraud and conspiracy – is the first to be tried by special counsel Robert Mueller and focuses on Manafort’s business dealings. It doesn’t directly have to do with Manafort’s work for Trump.
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