As Manafort Trial Continues, The Defense Gets Its Shot At Ex-Partner Rick Gates

9 hours ago
Originally published on August 7, 2018 2:53 pm

Updated at 2:10 p.m. ET

Rick Gates, the marquee witness of Paul Manafort's trial, remained in the spotlight on Tuesday as he walked jurors through the intricate international financial web that Gates says he and Manafort spun to commit bank and tax fraud together.

As Manafort's former business partner and right-hand man, Gates testified in granular detail about how the two men used bank accounts in Cyprus and a middleman lawyer nicknamed "Dr. K" to hide and receive payments from Ukrainian oligarchs.

"I believe [Manafort] understood his name would not be represented, nor would mine," Gates said.

When asked by prosecutor Greg Andres who controlled the overseas accounts, Gates responded: "[Manafort] always had control."

"And whose money was in those accounts?" Andres followed.

"Mr. Manafort's money," Gates said.

Gates also testified about falsifying mortgage documents and lying to banks to help Manafort qualify for loans.

Prosecutors want to prove that Manafort acted with intent and did not just make unassuming mistakes. To that end, Gates reiterated that Manafort directed the actions he took and remained closely involved.

Jurors were shown an email in which Manafort responded "WTF" when confronted with how much he would have to pay in taxes if he did not adjust his taxable income one year.

Cross-examination

Tuesday is Gates' second day on the witness stand. In the afternoon, he appears set to undergo a brutal cross-examination by defense attorneys who are keen on damaging his credibility in the eyes of the jury.

Gates first took the stand late Monday afternoon, drawing gasps from the packed courtroom in Alexandria, Va., when his name was announced as the next witness. He pleaded guilty in February to conspiracy and other charges as part of an agreement to cooperate with federal prosecutors.

Within the first hour of his testimony, Gates said explicitly that he broke the law with Manafort, including by providing false and doctored documents to banks in an effort to inflate Manafort's income to qualify him for loans.

Gates also said he lied to accountants working on Manafort's taxes, to conceal foreign bank accounts that prosecutors say Manafort used to hide tens of millions of dollars from the IRS.

"At Mr. Manafort's request, at different points in the year, we did not disclose the foreign bank accounts," Gates said.

Prosecutors say Manafort did lucrative political consulting work in Ukraine, and then kept much of the money he made in offshore accounts and companies. He would then use overseas wire transfers from those secret accounts to buy luxury items like custom suits and a Land Rover — and avoid paying taxes.

When his consulting work dried up after the change of power in Ukraine, prosecutors say, Manafort turned to loans to maintain his lifestyle. The government's lawyers say he qualified for them by lying to lenders. Manafort is charged with 18 counts of tax and bank fraud.

Gates has spent much of the past two days corroborating that version of events in answering questions from the government's prosecutors, but on Tuesday afternoon, Manafort's defense team will get a chance to paint a different picture.

Defense attorneys' case

Manafort served as Donald Trump's campaign chairman for a time in 2016 and Gates was his deputy in that role, too. So far, that chapter has not figured in Manafort's trial, and defense attorneys pointed out long before the trial began that Manafort has not been charged with conspiring with the Russians.

In the telling of Manafort's legal team, any problems with his financial paperwork were either mistakes or the fault of Gates, who they say was stealing from Manafort and is now cooperating with investigators to cover his tracks.

In his plea deal, Gates admitted to lying to investigators a number of times, and on Monday he admitted to embezzling hundreds of thousands of dollars from Manafort's company, in the form of falsified expense reports.

"Rick Gates had his hand in the cookie jar, and he couldn't take the risk that his boss might find out," Manafort defense attorney Thomas Zehnle said in his opening statement last week.

Prosecutors have sought to undercut this argument by repeatedly asking witnesses who dealt with Manafort and Gates about the dynamics of their relationship, trying to underscore that Manafort was the supervisor.

Legal analysis

Bill Coffield, a D.C.-area attorney who specializes in white collar law, called it a good move by prosecutors to bring up Gates' theft from Manafort. That foreclosed the ability for defense attorneys to bring it up as a bombshell revelation in cross-examination and imply the government was trying to hide something, he said.

Coffield added that prosecutors need to use Gates' testimony to flesh out the narrative of Manafort's alleged crimes, but they also need to continue to back it up with documents and other witnesses who dealt with Manafort's finances.

"What the prosecution needs to do is put some meat on the bones," Coffield told NPR's Morning Edition. "They've got somebody whose credibility — talking about Rick Gates here — they've got somebody whose credibility has been severely wounded."

Judge T.S. Ellis III has also taken on an outsize role throughout this trial, and that has continued into the second week.

On Monday, he clashed with prosecutors over the pace they were taking, as they sought to detail Gates' travel history to and from Ukraine.

"Let's get to the heart of the matter," Ellis interrupted.

"Judge, we've been at the heart ..." Andres said.

"Just listen to me!" Ellis responded.

Later in the day, Andres apologized to the judge and Ellis accepted, saying: "I'm not concerned about that at all. I remember trying cases."

The judge pushed back on prosecutors last week too.

When they tried to illustrate Manafort's wealth, Ellis stopped them, saying it wasn't a crime to be rich. When they tried to talk about the Ukrainian oligarchs who paid Manafort, he said it "wasn't the American way" to bias a jury against a defendant based upon the people he chooses to surround himself with.

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