After the jury was dismissed, U.S. District Judge T.S. Ellis decided to talk about the responsibilities of the press after his grilling of prosecutors made waves yesterday.
Ellis said he had come across misleading news reports that suggested less-than-complete understanding of the legal arguments being made in the trial. And he said, “I’ve contributed to that by comments I’ve made.”
Ellis dressed down prosecutors in pretrial hearings yesterday, implying that they put Manafort on trial only “to get Trump,” focusing intently on their frequent use of the word “oligarch” in referring to business figures financing Viktor Yanukovych’s campaign for president of Ukraine. Manafort spent most of a decade as a consultant to Yanukovych and his Party of Regions.
Ellis yesterday stressed the traditional definition of “oligarchy,” meaning a state in which power resides in a select few. Prosecutors’ use of the word was meant to imply that Manafort was consorting with criminals, when “the only thing we know is that they have a lot of money,” he said, ordering prosecutors to “find another term to use.”
Ellis said today that he’s “not much for the press” and was speaking out because “the public should understand these proceedings.”
The final witness today was James Philip Ayliff, a certified public accountant for Kositzka, Wicks and Co., or KWC, of Richmond.
The prosecution started questioning by asking a lot of background questions — Who is he, how did he get into accounting, what does a CPA do and so forth.
Ayliff said all dealings with a CPA start with an “engagement letter” that lays out what is expected of the client and the accountant. In an engagement letter signed by Paul Manafort, it is written, “You are responsible for management decisions and functions.”
Tax returns from 2011 to 2015 shown to the jury were all signed by Manafort. One of the questions on the return was “Did you have signatory authority in an account in a foreign country?” The response on the tax form signed by Manafort was “No.”
Ayliff said KWC also separately asks clients whether they have any foreign accounts, which would affect how tax return documents are prepared. They got through less than an hour today, so Ayliff is expected to return to the stand at 9:30 tomorrow morning when court resumes.
During cross-examination, the defense posited a few explanations for the discrepancies in the 2015 and 2016 bank statements.
One: A forgiven loan from Paranova, an overseas company that sometimes wired money to Manafort. When a loan is forgiven, it is usually credited as income — which in this case would have counted for an additional $1.5 million in income. Another: a simple miscalculation. The numbers did not add up in the 2016 bank statement given to Citizens Bank for a mortgage loan.
The defense also clarified to the jury that Heather Washkuhn, Manafort’s bookkeeper, was not a CPA and only had some accounting background. They asked her if Gates sometimes approved payments.
“There wasn’t a wall between personal and business expenses, correct?” Washkuhn said that Gates helped out with personal expenses at the direction of Manafort. “Mainly Manafort was the source” of approving payments and financial adjustments, she said.
Upon redirect from prosecutor Greg Andres, Washkuhn testified that Manafort did not disclose to Citizens Bank that he was renting out one of his properties on AirBnb. She also reiterated that she was not aware of any Manafort-controlled foreign bank accounts.
In total, Washkuhn spent more than three hours on the stand.
Next up: personal accountant Philip Ayliff.
The prosecution just finished directly questioning Heather Washkuhn, Manafort’s bookkeeper, after more than two hours.
Washkuhn testified that she kept track of Manafort’s accounts and supplied his tax preparers with financial information. She walked the jury through DMP International’s financial statements from 2013 to 2016. DMP recorded a profit until 2015, when they registered a loss of more than $638,000. In 2016, they recorded a loss of almost $1.2 million.
Prosecution also entered into evidence email chains between Washkuhn and Rick Gates. On one instance, in January of 2016, Gates said that Manafort wanted to add $1.6 million to their financial statements and asked her to do it. Since her company, MKSFB, kept records on a cash basis, she could not simply add more accrual revenue.
For the first time, the prosecution showed that Manafort submitted false financial statements to obtain a home loan. An email between Gates and Bank of California attached a false financial statement that showed that DMP International made $4 million more in 2015 than the official statement from MKFSB. An additional fake financial statement was attached to an email from Manafort to the Bank of California showing that DMP made more than $3 million through September 2016 — the actual statement from MKSFB showed a loss of $1.1 million.
Washkuhn testified that she knew these financial statements were fake because words were misspelled (“Septembe” instead of September; “revmw” instead of review) and the necessary disclaimer was missing from the bottom of the page.
Other financial documents from DMP showed that Manafort was receiving income from various overseas companies.
Barbara McQuade, former U.S. attorney and NBC News analyst, on testimony from Gates:
“Today, Greg Andres said that the prosecution “fully intends to call” Rick Gates as a witness after Uzi Asonye yesterday said that they may or may not call him.
“A defense theory has appeared to emerge that Gates was responsible for fake invoices from vendors to Manafort for items such as custom suits, landscaping and home entertainment. The government has offered these fake invoices (four so far), possibly to suggest that Manafort created them to extract even more cash from his shell companies, though the government’s theory about these fake invoices is not yet clear.
“The defense has asked questions on cross-examination tying these fake invoices to Gates. And of course, in opening statement, the defense argued that Gates embezzled from Manafort. It may be necessary for Gates to testify to refute this theory.
“It also may be necessary for Gates to testify for a more technical reason to establish the existence of a conspiracy, so that certain documents will be admissible under the co-conspirator exception to the hearsay rule. The judge said the government would likely use Gates’ testimony to attempt to establish the conspiracy for this purpose. Andres said yes, but that’s not the only way they could prove a conspiracy, so the prosecution is still hedging a little.”
Manafort’s bookkeeper is up.
Heather Washkuhn has been Manafort’s bookkeeper since 2011 and kept track of all of his income, as well as personal and business expenses. She told prosecutors that she did not know about any of Manafort’s foreign bank accounts.
Washkuhn said she communicated with Rick Gates on business expenses from time to time but Manafort alone handled his personal expenses. She described Gates as Manafort’s “right-hand man.” Manafort “approved every penny” when it came to personal expenses, she said.
The jury was shown a general ledger from 2011 that detailed Manafort’s income and expenses. She was asked to describe in detail income from foreign accounts that totaled more than $4 million in 2011. She said she didn’t know the source of the accounts, only that they were coming in from overseas.
Washkuhn testified that she had signatory access to most of Manafort’s accounts but didn’t always get the access and documents that she requested.
Prosecutor Greg Andres asked Washkuhn about more than a dozen foreign companies that deposited or were billed through the ledger. Washkuhn said she was not aware of any of them.
More from Chuck Rosenberg, former U.S. attorney and NBC News analyst, on Judge Ellis’ decision to prevent the prosecution showing more photos of Manafort’s expensive suits and luxury goods:
“Some judges recognize when the government has a strong case and dial it back a bit (i.e., limit the government’s presentation in some way) ensuring that there is a clean record on appeal, if the government should obtain a conviction.
“It’s a bit of a risky game for a judge to play. He should just call balls and strikes, and apply the rules of evidence as written.
“Here, I believe that means the photographs would be admissible under Rule 403 as more probative than prejudicial. But, I’ve had judges say to me, in trial, you don’t need it (i.e., you will thank me when the record goes up to the appellate court and it is clean).
“The government cannot appeal an acquittal, so the judge’s calculation carries much more risk for the government than for the defendant.”
“You never know how a jury is processing this, but the evidence from where I sit looks overwhelming … it’s in black and white, it’s in the documents,” Dilanian tells MSNBC’s Ali Velshi.
The prosecution’s 12th witness will be Heather Washkuhn, Manafort’s bookkeeper. This suggests the prosecutors are finished with vendor testimony and now they are moving on to explaining how they claim Manafort hid his overseas accounts.
Michael Regolizio, the owner of New Leaf Landscaping and Maintenance, discussed the work he did for Manafort’s home in Bridgehampton, New York.
He provided tree services from 2010-2012, and then took over full responsibility of all lawn care and maintenance from that point on. In government questioning, Regolizio said he only dealt with Manafort over phone and email, and Manafort always told him when to expect the wire transfers. Regolizio never spoke or had any dealings with Rick Gates or Konstantin Kilimnik.
Some of the work Regolizio did included mowing Manafort’s lawn twice a week, and working on hundreds of flowers and a waterfall feature. Regolizio also pointed out that there was a flower bed shaped in the form of an “M” at the beginning of the driveway.
Regolizio was paid more than $400,000 between 2010-2014. The court was shown there were a number of Cyprus wire transfers that were applied to Manafort’s New Leaf Landscaping account. Manafort was the only customer of Regolizio’s paying by international wire.
Regolizio testified that starting around 2014, he was instructed to “CC” another party on the invoices, but could not remember who it was.
Regolizio was shown the purportedly fake invoices, and confirmed he had never seen them before the government showed them to him a few weeks ago. This makes it the fourth “fake invoice” of the trial so far.
The defense for the first time called suspicious invoices “fake,” and Regolizio agreed.
The prosecution’s first witness of the day three was Joel Maxwell, COO of Big Picture Solutions.
Maxwell testified that Manafort was a “top five” client of his company, and spent over $2.2 million over on TVs, internet networks and home automation at five of his properties. He said that he dealt directly with Manafort until 2013, when he billed through Rick Gates.
Prosecutors entered into evidence bank statements that showed money coming to Big Picture Solutions from Cyprus and Maxwell testified that the money was applied to Manafort’s accounts.
A potentially fake invoice was shown to Maxwell. “I’ve never seen this,” he said. The invoice purported to be from Big Picture Solutions, LLC (Maxwell’s company is Inc, not LLC) billing Global Endeavour, LLC for $163,000.
There was a payment stamp from a bank in St. Vincent and the Grenadines. This is the third potentially fake invoice to Global Endeavour that has been presented at trial. Bank records showed that Big Picture Solutions were paid on occasion from Global Endeavour’s Cyprus accounts.
Upon cross-examination, Maxwell testified that in emails Gates explained that it was “hard to move money from his account to mine.”
Next witness: Michael Regolizio, the head of a landscaping firm.
And Day Three is underway.
After the prosecution yesterday cast doubt on calling Rick Gates as a witness, they immediately clarified this morning that they intend to have him on the stand. Gates, Manafort’s former business partner, has already pleaded guilty in a deal with Mueller and is considered a key witness for the prosecution.
Prosecutor Uzo Asonye said they are constantly evaluating which witnesses will be called from the list of 35, in an effort to shorten the trial.
Meanwhile, we have an update on the dispute over whether photos of Manfort’s flashy suits and expenditures will be shown to the jury.
Judge Ellis told prosecutors that he isn’t likely to allow it because doing so could unfairly “besmirch the defendant.”
“It could engender bias against rich people,” Ellis told prosecutors, saying he didn’t want them to “gild the lily.”
The jury has seen some photos, but despite a brief filed late Wednesday from prosecutors, urging the judge to let them show more evidence of Manafort’s lavish spending, the judge indicated he’s not likely to loosen the reins. Jurors have seen some photos, but not as many as prosecutors wanted them to see.
And in case you were wondering what a $15,000 ostrich jacket looks like, that is one on the left. These jackets were among the collection of high-end menswear submitted by the government as evidence on Wednesday.
And some thoughts from Chuck Rosenberg, former U.S attorney for eastern district of Virginia and NBC News analyst, on the trial brief filed by Mueller’s team overnight:
“The government believes that the judge has improperly prohibited them from introducing certain evidence at trial, to demonstrate that Manafort intentionally filed false tax returns. Remember, that burden is on the government and it must show specific intent. That’s a high burden. So, the government did some research and is presenting the judge with a bunch of cases that say it would not be error for him to permit the photographs of Manafort’s luxury items and large expenditures to be put before the jury.
“Note that the cases the government references generally say it is not an ‘abuse of discretion’ for a judge to permit such evidence to be introduced. This is where they think the judge is wrong in ruling that the evidence they want to use is essentially more prejudicial than probative — the heart of rule 403 of the federal rules of evidence. The judge is wrong to keep such evidence out, and well within his discretion — so these cases say — to permit the government to introduce it.
“The trial brief is an attempt by the government to get the judge to change his mind. I will say this about Ellis — I have seen him reconsider his own rulings during trial. The judge could change his mind, so this is worth a shot by the government. I have occasionally done this in the middle of trial where I think a judge is misinterpreting a rule of evidence or a rule of procedure.”
Good morning,
The special counsel’s team filed a brief overnight urging the judge to reconsider his decision not to allow them to show photos of Manafort’s suits and other luxury goods. Yesterday, the government produced invoices for some $1.26 million in clothes, including a $15,000 suit made from ostrich.
Mueller’s team argues they have a right to show photos of the clothes to help prove their case, and that Judge T.S. Ellis is wrong to say it would be unfair. (The judge, for his part, has said it’s not illegal to have expensive taste.)
“Courts have consistently held in tax and bank fraud cases that evidence of a defendant’s spending and lifestyle is relevant to his intent and is not unduly prejudicial,” the brief says, directly challenging the ruling of Judge Ellis, who has consistently blocked prosecutors from showing the jury such evidence.
Furthermore, the brief states: “That Manafort had an expensive lifestyle that required lots of money to maintain is important proof as to why he would commit the bank frauds. When Manafort’s income declined in 2014, he resorted to bank fraud as a means to maintain his lifestyle. Indeed, the government is entitled to refute the common argument that a wealthy person has no need to commit bank fraud, by demonstrating that Manafort had grown accustomed to his material wealth.”
The ninth witness brought to the stand by the government was Doug DeLuca, another contractor who performed work on Andrea Manafort’s Arlington home. The work included exterior design, an outside kitchen with soapstone countertops, a living room and a pergola.
DeLuca’s firm, Federal Construction Company LLC, was paid $104,424 by Paul Manafort.
DeLuca told attorney Brandon Van Grack that he was subpoenaed for documents related to his business with Manafort, including emails, sketches, photos of progress and completion, and bank statements.
It was established through an email brought into evidence that DeLuca would handle design with Andrea, and matters of construction and budget with Paul.
In one agonizing moment, Van Grack asked DeLuca what a “pergola” is. DeLuca took Van Grack to task, offering a lengthy explanation, including specific details about the wisteria vining up the wood to create natural shade. Judge Ellis interjected, asking Van Grack the “virtue” of “having a witness describe in exquisite detail” this aspect of the work. “You’re done. Move on,” Ellis said.
Manafort paid Federal Construction via wire from an entity called Lucicle Consultants Ltd — not to be confused with Lucille LLC, the entity that purchased Andrea Manafort’s home — and Pompolo Ltd.
DeLuca said he had no knowledge of the origins of these companies.
Again appearing to try to head off the defense’s strategy, Van Grack asked DeLuca if he’d ever met or spoken with Rick Gates, or if he’d received payment from him. DeLuca said he not to all of these questions.
In his cross examination, defense lawyer Jay Nanavati’s asked DeLuca if Manafort ever said this would be a business project (“No”), if he ever said the house would be used for anyone other than Andrea (“No”) and if he’d ever heard of Lucille or Lucicle except through Paul Manafort (again, “No”).
Stephen Jacobson testified that his company, SP&C, worked for Paul Manafort beginning in 2001 and billed $3.2 million for work on at least five of his homes — including one in Trump Tower.
Prosecutor Greg Andres asked Jacobson how he received payment on Manafort’s invoices. Jacobson said that the bills were mostly paid by international wire transfer. Prosecutors showed records of international wire transfers from banks in Cyprus to SP&C that Jacobson said matched outstanding invoices for work done at Manafort’s properties.
Andres entered into evidence an invoice that purported to be from SP&C to a company named Global Endeavours, but Jacobson said he did not recognize it. The balance matched a $75,000 payment from Cyprus to SP&C from two days earlier in November 2013. The prosecution was implying that something is suspicious about this invoice but haven’t yet expanded any further.
Earlier in the day, the manager at a luxury New York menswear shop said that he didn’t recognize a different misspelled invoice.
Upon cross-examination, defense attorney Jay Nanavati asked Jacobson to describe Manafort’s demeanor. “Tough but fair,” Jacobson said. Jacobson testified that after Manafort handed off bill paying to a woman named Heather, the bills were paid in a more timely fashion.
Next on the stand: Douglas DeLuca, a builder.
The seventh witness the government called to the stand was Wayne Holland, a retired Army lieutenant colonel turned contractor and real estate agent, and who is a neighbor of Manafort’s. Holland called Manafort a “very close friend” for over 30 years.
When asked if he knew what Manafort had done for a living, Holland said he knew he was a successful lobbyist.
Holland was an agent for Manafort’s daughter Andrea when she purchased a $1.89 million house in Arlington, Virginia, in 2012. Holland told the jury that Manafort told him to “go for it” and offer the full asking price. He said the money deposit for the home came from Andrea, and Manafort paid the rest.
He said it was a cash offer.
Holland didn’t have a sense of where geographically the money came from. Prosecutor Uzo Asonye presented an email from Paul Manafort to Holland regarding the purchasing property. The email said:
“1.9 million should be in your escrow account tomorrow morning. It is coming from Lucille LLC.”
Holland did not know what Lucille LLC was, and didn’t inquire as that was beyond his job requirements as the buyer’s realtor. He said Manafort did not say where the wire was coming from.
When asked about Rick Gates, Holland stated he was familiar with him in regards to his involvement in the news, but he was not involved in home purchase.
Defense attorney Jay Nanavati reiterated in cross examination that Holland didn’t know and didn’t need to know Lucille, as it was a matter for the seller. He asked finally, “Is Paul Manafort one of the nicest neighbors you’ve had?”
Prosecutor Uzo Asonye told Judge Ellis that the prosecution is moving “ahead of schedule,” and that he anticipates the government will rest its case next week. He did not specify a more specific time frame.
The CFO of a Beverly Hills store that has called itself “the most expensive store” testified that Paul Manafort was a good customer. Ron Wall of House of Bijan, Wednesday’s fourth witness, said most customers paid by card or check, but some paid by wire transfer.
Prosecutor Greg Andres showed Wall a series of invoices dating from 2010 through 2012 totaling $334,325, all of which were paid through wire transfers from banks that originated in Cyprus.
Between Alan Couture of New York and Bijan Couture, so far on Wednesday the government has produced invoices for some $1.26 million worth of clothes that it says Manafort purchased between the years 2010 and 2014.
In defense attorney Jay Nanavati’s cross examination, he pointed out to the jury that Wall had never met Manafort, had not been a sales person for Bijan or in a “customer-facing” position, and did not interact with Manafort. He was also quick to reiterate that other clients at Bijan also paid through wire transfers.
Another witness, Daniel Opsut of Mercedes-Benz of Alexandria, testified that Manafort had paid for a new Mercedes with money from Cyprus. Opsut said that in October 2012, Paul and Kathleen Manafort bought a new 2013 SL 550, list price $123,000, by trading in two other cars and covering the remaining $62,750 with a payment from Cyprus Popular Bank.