Rick Gates took the stand a few minutes ago.
The prosecutor walked Gates through some biographical information and his background with Paul Manafort. Gates said that he met Manafort while he was an intern with one of Manafort’s former firms. However, he didn’t work with Manafort directly until he started working at Davis Manafort Partners in October 2006.
The prosecution asked, “Were you involved in any criminal activity with Mr. Manafort?”
To which Gates answered, “Yes”.
“Did you commit any crimes with Mr. Manafort?” the prosecution asked.
“Yes,” Gates answered.
Gates also testified that he was arrested and has entered into a plea agreement with the government. Asonye entered the plea agreement into evidence.
Gates, who usually sports a beard, looked almost unrecognizable with a clean-shaven face. He is wearing a blue suit. Neither Manafort nor his wife seemed to react when he took the stand.
The judge just called for a bench conference. Questioning should resume momentarily.
Manafort’s longtime business partner and the prosecution’s star witness takes the stand.
After redirect from prosecutor Uzo Asonye and a brief recross from Downing, Laporta was allowed to step down.
Though Downing told the court that we’d be hearing from Rick Gates after Laporta, the prosecution called up Paula Liss, a certified fraud examiner and money laundering specialist. Liss is a senior special agent with the Financial Crimes Enforcement Network, or FINCEN, at Treasury.
Liss’s testimony was very brief, focusing on FBAR, or Reports of Foreign Bank and Financial Accounts.
Kevin Downing, a lawyer for Manafort, went after Gates’ credibility during his cross examination of Manafort’s accountant, Cindy Laporta.
“Had you known that Rick Gates was embezzling from Mr. Manafort, would you trust anything he says?” Downing asked Laporta. She testified that even if Gates had embezzled, the accountants are usually the last to know.
Downing also asked Laporta if failure to provide requested documents could signify that someone was embezzling, Laporta said it was a possibility.
Prosecutor Uzo Asonye objected to this line of questioning, citing that it would require the witness to speculate. Judge T.S. Ellis overruled the objection because Downing said that he intends to offer evidence that Rick Gates was embezzling from Manafort.
Rick Gates, Manafort’s former business partner, will be next to take the witness stand, Kevin Downing, one of Manafort’s attorneys, said Monday.
Downing confirmed Gates’ impending testimony during his cross-examination of Cynthia Laporta, Manafort’s accountant, who testified Friday that she helped Gates falsify tax and bank documents.
It is Day 5 of the federal trial of Trump’s former campaign chairman, one of two Manafort is scheduled to face. This first trial is for tax and bank fraud charges, related to Manafort’s financial dealings as a political consultant in the Ukraine. Gates is considered a key prosecution witness — a man Mueller’s team says was heavily involve in hiding millions overseas. He pleaded guilty to reduced charges in February and agreed to cooperate with the government.
Cindy Laporta testified that she sent false documents and misrepresented a home so that Manafort could get a mortgage on one of his New York City properties.
The situation started in 2016 when Paul Manafort started applying for mortgage loans for his house on Howard Street. Laporta testified that Rick Gates told her that it was used as a second home, rather than a rental. “The rate for a second home is better than a rate on a rental property,” she said. Tax documents showed that the house on Howard Street had brought in more than $115,000 in 2015, when it was available for rent 365 days a year.
Laporta said that she relied on Gates’ representation of how the home was used rather than checking Manafort’s general ledger, which would have shown it to be a rental property.
Later in the year, the loan application was denied when the bank questioned a $1.5 million loan from Peranova Holdings, LLC, a company that we now know to be controlled by Manafort. Citizens Bank wanted to see the loan documents. Laporta testified that she was directed by Gates to tell the bank that the loan had been forgiven even though she did not believe that to be true. Laporta did and cc’ed Paul Manafort on the email.
The jury was then shown an email chain where Gates told Laporta that he would “chase down the signatures” he needed for a loan forgiveness letter that was then backdated to June 2015. Laporta then sent the document to the bank. “I believed the bank would have to vet the document themselves,” she said, and she believed that she would be protected by the fact that she didn’t edit the document herself.
Cindy Laporta, Manafort’s accountant on his 2014 and 2015 tax returns, is the first witness to take the stand who had been granted immunity.
She said she was in on discussions to falsify a loan document at the direction of Rick Gates so that Manafort could afford to his pay his 2014 income taxes.
She acknowledged that she knew it wasn’t appropriate to change these documents. “You can’t pick and choose what’s a loan and what’s income,” she said.
Laporta also testified that DMP had four season Yankees tickets that were classified as 80 percent business expense and 20 percent personal expense.
She was given a list of over a dozen foreign entities and said she didn’t know what they were. She assumed some were DMP’s clients. The prosecution asked her if she would want to know for tax purposes if Manafort owned these entities.
Manafort lawyer Kevin Downing led Ayliff’s cross examination.
He asked Ayliff a few “big picture” questions — asking what it was like working with Manafort and Gates. Ayliff said he found it difficult to get the information he often needed. He said when he did get the information he needed, it was often delayed or not until the last minute. This made it harder for him to do his job, Ayliff said.
Downing asked if it was Gates or Manafort that he worked with primarily. Ayliff responded “Both, but towards the end it was mostly Gates.”
In one exhibit the government showed the court, there was a question about whether or not an Foreign Bankand Financial Accounts report (FBAR) had to be filed concerning a Manafort company in Cyprus. Someone on Ayliff’s team consulted other tax experts at KWC, and the decision was made that an FBAR did not have to be filed, according to Ayliff.
Ayliff said he never learned of any entity that Paul Manafort had in Cyprus.
He said there were a number of things Manafort did not tell his bookkeepers or CPAs that would have been good for them to know. Here’s one such interaction in follow up questioning from the prosecution:
PROSECUTION: Did Manafort ever tell you Peranova Holdings Limited was an affiliate of DMP International?
PROSECUTION: Would that have been good to know?
Defense attorney Kevin Downing said would ask Ayliff if he kept documentation for auditing purposes.
His argument, he said, will be that the prosecution is alleging that Manafort knowingly concealed his overseas accounts. If he wanted to do that, why would he leave evidence of that on his bookkeeping ledgers? “Only a fool” would knowingly do so, Downing said.
Cross examination will begin after lunch.
The prosecution asked Ayliff about a 2012 loan to Paranova Holdings. Ayliff testified that he asked Manafort for any documentation for this loan but was not given any. Manafort did not pay any interest on this loan in 2013 or 2014, he said.
Ayliff testified that Manafort’s reported income dropped in 2014, at which point he started applying for mortgage loans. This lines up with the prosecution’s argument that Manafort’s cash flow dried up when Viktor Yanukovych was ousted.
The jury was shown an email from Manafort to Ayliff where Manafort instructed Ayliff that a property on 5th Avenue in New York City was never rented out, despite contrary documentation. Manafort told Ayliff to tell the bank that it was a personal residence.
Ayliff said that it was his understanding that it was always a rental property. “I told the bank that it was rental, not a personal residence,” Ayliff said.
Manafort’s accountant James Philip Ayliff returned to the stand Friday morning. He testified that he asked Manafort if he owned any foreign bank accounts and was told no.
He was walked through a list of 15 Cyprus entities and Ayliff said that he thought they were Manfort’s clients or wasn’t aware of them altogether.
At this point, Manafort’s wife, Kathleen, left the courtroom looking visibly upset. She later returned.
The jury saw that Manafort represented in each of his personal tax returns that he didn’t own any foreign accounts. The prosecution asked Ayliff about Manfort’s relationship with Gates, who said that he was Manafort’s “right hand.”
Ayliff also testified that he emailed Gates about a suspicious property purchase in New York City, asking about the source of the funds. Gates had responded that Manfort told him that the money came from his wife’s savings account, Ayliff said.
Testimony will turn to how Manafort classified his personal and business expenses.
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 Uzo 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.”
CORRECTION (Aug. 3, 2018 3:48 p.m. ET): An earlier version of this post misspelled the first name of an assistant U.S. attorney. He is Uzo Asonye, not Uzi.
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.