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. We’ll have live coverage here throughout Day 5 of the trial.
4:21 p.m. Rick Gates has been called to testify
The prosecution’s start witness and Paul Manafort’s former business partner has been called to testify against him, after brief testimony from a Treasury official.
4:08 p.m.: Prosecutors call Treasury official, not Rick Gates, as next witness
The prosecution has just called its next witness, Paula Liss, a special agent with the Financial Crimes Enforcement Network of the Treasury Department, who is an expert in money-laundering and accounting.
One of Paul Manafort’s attorneys had previously said the next witness would be Rick Gates, but apparently prosecutor’s had other plans.
Liss took the stand at 4 p.m., after a lengthy private conference between the judge and lawyers on both sides. Judge Ellis admonished the prosecutor to limit the scope of his questions to those agreed to during the session held out of earshot of the jury and the public.
4:00 p.m.: Accountant testifies on Manafort income
Paul Manafort did not file 2016 tax returns declaring a $1.9 million loan from Telmar Investments as income and paying a penalty until Oct. 16, 2017 — after he knew he was under investigation and just two weeks before he was indicted in D.C. federal court, according to documents introduced by his defense.
Prosecutors say the company was a shell he used to hide income in Cyprus.
Assistant U.S. Attorney Uzo Asonye elicited that information on redirect questioning of accountant Cindy Laporta, He asked her whether, even if a loan disguising income is eventually “forgiven” and paid off, calling it a loan is still false, she said “Yes.” Asonye also totaled up the taxes paid by Manafort between 2005 and 2015 that she recorded on a spreadsheet as about $31 million.
“Is that less than $60 million?” Asonye asked.
“Yes,” she said.
Prosecutors say Manafort made over $60 million in Ukraine during that time period.
Asonye also asked if she had any evidence that large “purported loans” from Oleg Deripaska, a Russian oligarch, were ever repaid or reclassified as income. Laporta said she had no record of that.
He also tried to rebut the defense argument that errors in Manafort’s taxes could be chalked up to their complicated nature.
He asked if she was confused about whether a condo Manafort owned in Lower Manhattan was a rental property or a second home. “Was I confused? No,” she said. Manafort classified it as a rental for tax purposes but a second home to get a new loan, according to her testimony.
Asonye asked if it required a certain expertise to know that a loan forgiveness letter Rick Gates sent her had been “backdated” to look like it was written eight months earlier. “No,” she said.
He asked if she needed expertise to know that you can’t disguise income as a loan. “No,” she said.
“Is that complicated?” he asked. “No,” she said.
“Did you need to be an expert to know that that was wrong?”
“No,” she said.
3:02 p.m.: Rick Gates to be next witness at Manafort trial
Rick Gates, Paul Manafort’s former business partner and prosecutors’ expected star witness, will testify next, Manafort’s defense attorney said.
Defense attorney Kevin Downing made the revelation toward the end of his cross examination of one of Manafort’s accountants. As he tried to question the accountant, Cindy Laporta, about what he said was Gates embezzling from Manafort, a prosecutor interrupted, saying he should not be allowed to ask about facts that were not yet in evidence.
Downing thundered back that prosecutors knew such facts might soon be discussed, adding, “Mr. Gates is next up.”
Gates is expected to offer key testimony fleshing out allegations that Manafort filed false tax returns, committed bank fraud and lied to get loans worth millions. It will likely be one of the most dramatic moments of the high-profile trial.
Gates, who was originally charged as a co-conspirator in the case, is cooperating with prosecutors after working out a plea deal. He pleaded guilty to conspiracy and lying to the FBI in February.
Gates, whom multiple people have called Manafort’s “right-hand man” during the trial, had an unparalleled view of Manafort’s business and financial dealings, so his testimony could prove damning for Manafort.
Defense attorneys have sought to portray Gates as the architect of any financial wrongdoing, saying he had control of Manafort’s finances and sought to line his own pockets.
Several prosecution witnesses have challenged that contention, portraying Manafort as intimately involved in decisions about his finances.
Downing has now finished his questioning of Laporta. Prosecutors say they will have about 15 more minutes of questions for the accountant before the next witness. Court is on a break until 3:05 p.m.
2:45 p.m.: Accountant testifies Manafort made more than $30 million over a decade
Manafort’s attorneys are now arguing that he did ultimately declare many of the loans prosecutors called fraudulent as income.
Defense attorney Kevin Downing showed accountant Cindy Laporta a spreadsheet of his liabilities from 2005 to 2015 pulled from his tax filings. Laporta said her firm would make these spreadsheets for clients to be better prepared for the next year. Included is a $10 million loan from Russian oligarch Oleg Deripaska in 2010, as well as one marked only “Russian NGO” from the following year for $3.5 million.
“There are over $30 million in loans reported?” Downing asked. She agreed. About $10 million came from Yiakora Ventures, which prosecutors describe as one of Manafort’s shell companies.
But Downing pointed out that $15.7 million was set to be categorized as a distribution to Paul Manafort — meaning he would have paid taxes on it.
Downing then asked Laporta to look at Manafort’s 2016 tax return. Her firm did not prepare it, but his new accountants relied in part on information she gave them.
Assistant U.S. Attorney Uzo Asonye objected, saying 2016 is outside the time frame of the tax fraud alleged in the trial. But Judge Ellis allowed the defense to proceed.
Laporta, the accountant, confirmed that the spreadsheet she prepared showed that Manafort had reported $30.2 million in gross income to the federal government during the 10-year period and paid $8.38 million in federal income tax. In 2016, she said, his return showed he reported as income a $1.9 million loan from Telmar Investments, another Cypriot company that prosecutors say he used to avoid taxes. He also paid a $30,000 penalty.
Downing is arguing that Manafort ultimately did pay his taxes, and that any lapses were simply mistakes made in a small and complicated business. He asked her if it was common in partnerships for a partner to pay for some expenses and call it loan to the firm, then forgive that loan – she agreed that it was.
2:14 p.m.: Attorney tries to highlight complexity of Manafort’s finances, Gates role
In his early questioning of accountant Cindy Laporta on Monday, defense attorney Kevin Downing seemed to be trying to highlight two themes.
Paul Manafort’s finances were so complicated that sorting through them each year was a chore even for his accountants. And Rick Gates was deeply involved in the process.
Downing asked Laporta about various properties Manafort owned in New York, highlighting how each year their status seemed to change. Sometimes they were used as rentals, sometimes as personal homes and frequently each was being renovated, Laporta testified.
“It was difficult to follow,” she said.
Prosecutors have accused Manafort of deceiving banks about the status of his properties to help him get loans. But Downing sought to cast as mere mistakes what prosecutors view as intentional misrepresentations.
Under Downing’s questioning, Laporta also conceded that she “relied on Rick Gates’s facts” as to how each property was used.
The testimony is important because prosecutors must prove Manafort was knowingly deceiving banks and the IRS. If jurors are to conclude that Manafort was merely sloppy with his finances – Laporta testified she was often getting materials close to when filings were due – that could benefit his defense. Laporta’s testimony about Gates, too, is somewhat helpful to defense attorneys, as they have sought to blame Manafort’s business partner for any wrongdoing.
1:55 p.m.: Testimony resumes with Manafort’s attorney taking aim at accountant’s work
Kevin Downing’s cross-examination of accountant Cindy Laporta began as expected with him casting blame on both the accounting firm Kositzka, Wicks & Co. and Rick Gates for any issues with Manafort’s tax and loan documents.
First Downing asked why Laporta, who described herself as specializing in audits, was in charge of Manafort’s tax returns. She said that she worked with Philip Ayliff and a team on Manafort’s taxes, which is standard at the firm.
Next, Downing asked whether it was “quite a chore” to get Manfort’s financial information, and whether the team often ran up against deadlines and was frustrated by the disorganized, inefficient process.
“Yes,” Laporta responded.
She also agreed that they often went to Gates for that information.
“There came a point in time when you didn’t believe what Mr. Gates was saying to you?” Downing asked.
“That is correct,” Laporta replied.
1:15 p.m.: Key exhibits from Manafort’s trial so far
The special counsel has entered into evidence dozens of emails and financial documents. The emails are key to their case, because several show Paul Manafort participating in conversations involving financial claims his former accountant Cindy Laporta has testified were fraudulent.
Manafort’s deputy, Rick Gates, was the driving force in most of these conversations. It was Gates who emailed Laporta and other accountants in 2015 about adjusting a loan to save Manafort money on his taxes. It was Gates who asked to edit Manafort’s 2015 Profit & Loss Statement to reflect $2.6 million in as-yet unreported income. And it was Gates who drafted a loan forgiveness letter Laporta described as fake.
But in an October 2016 email, Manafort himself sent what his bookkeeper testified was a false Profit & Loss Statement to the Federal Savings Bank, showing more than $3 million in income. Laporta asked Gates in an email about a $1.9 million loan from Telmar Investments, which prosecutors describe as a shell company; Gates forwarded the question to Manafort. He was included on emails claiming a $1.5 million loan from another alleged shell company had been forgiven.
Emails also show Manafort discussing renting out a property he owned with his family in Lower Manhattan and later getting a loan on that property; Laporta testified that he instructed her to call it a second home to get a better rate.
In 2009, Manafort was on an email chain in which another accountant who testified last week, Philip Ayliff, asked Manafort about international wire transfers and warning that the Treasury Department has “really clamped down on these disclosures.” The following year, it was Manafort who emailed Ayliff to say he had no foreign accounts.
The documents also paint a picture of Manafort as financially strapped in 2016, the same year he volunteered to work for Donald Trump’s campaign for free. In an April 2016 email, his bookkeeper says his consulting firm’s health insurance policy is about to be canceled because it hasn’t been paid. In the 2016 financial documents she prepared, the firm is losing hundreds of thousands of dollars a month — more than $600,000 by August and more than $1 million by the end of the year.
With the trial scheduled to resume at 1 p.m., a representative from the special counsel’s office has just carted a stack of boxes into the courtroom. In a sign that prosecutors may plan to call Rick Gates to testify later today, two of the boxes are labeled “Gates.”
The courtroom is jam-packed, probably in anticipation of Gates’s testimony, with spectators having lined up for seats more than an hour in advance. Paul Manafort’s wife is again seated in the front row.
Read Devlin Barret’s report on this coming showdown from today’s Post:
Paul Manafort’s trial resumes Monday afternoon with the cross-examination of accountant Cindy Laporta. Just before recessing court Friday, Judge T.S. Ellis III told Manafort’s defense team that they were “not limited” in how they used the fact that Laporta is testifying under immunity from prosecution.
The “use immunity” order signed by Ellis compels Laporta to testify. Recognizing that she would invoke her Fifth Amendment privilege against self-incrimination, it says the Department of Justice has granted Laporta “immunity from the use against her in any criminal case of any testimony or other information compelled under such an order, or any information directly or indirectly derived from such testimony or other information.”
That means Laporta can’t be prosecuted using what she said in court or any of the documents she handed over to the special counsel. On Friday, she testified that she helped falsify financial documents to save Manafort money on his taxes and get loans from banks. Manafort directed the fraud, she testified, along with his deputy, Rick Gates.
Defense attorneys will probably argue that Laporta is only saying what the special counsel wants to hear to avoid prosecution herself.
Laporta is the first of five potential witnesses testifying under immunity orders. Conor O’Brien worked with her at the firm KWC and was on a conference call in which Gates said Manafort’s income taxes were too high and should be brought down by inflating the size of a loan. “The loan amount may need to be changed,” he wrote.
Prosecutors have pared down their case at Judge Ellis’s urging, and if Laporta covered everything O’Brien would have testified about, he might not be called.
The other immunized potential witnesses are Jim Brennan and Dennis Raico, both employees of the Federal Savings Bank, and Donna Duggan, an insurance broker. All were involved in Manafort’s efforts to secure loans.
Prosecutors laid out a substantial portion of their case against Paul Manafort in the trial’s first week. They showed jurors how Manafort lived large in the early 2000s — buying designer suits and expensive home renovations with money he made working from a pro-Russia presidential candidate in Ukraine — but then struggled as the candidate was chased from his home country, and his payments to Manafort dried up.
Prosecutors concluded the week with damaging testimony from one of Manafort’s former accountants, who admitted that, as Manafort struggled to maintain his lavish lifestyle, she knowingly submitted false information to the IRS and to banks so her client could save money in taxes or qualify for loans.
The accountant, Cindy Laporta, testified under a grant of immunity, and essentially admitted to participating in the tax and bank fraud of which Manafort is accused.
As week two begins, all eyes will be on Rick Gates — Manafort’s former business partner and the presumed star witness for the prosecution. While Manafort’s accountant described submitting false information to benefit Manafort, she often did so in consultation with Gates. Gates will have to explain what was going on behind the scenes between him and Manafort.
Gates’s testimony could be critical to the prosecution’s bid to show that Manafort acted intentionally to deceive banks and the IRS. But it will be equally important for Manafort’s defense, which has said Gates was the one who engineered the fraud of which Manafort is accused because he was embezzling money from Manafort’s company and trying to cover his tracks.
Prosecutors have said they could rest their case as early as this week. Testimony resumes at 1 p.m., when defense attorneys will get their first opportunity to question Laporta.