Defense attorney Kevin Downing portrayed Gates as untrustworthy and asked if he used money stolen from Manafort for an extramarital affair with a woman in the United Kingdom.
Paul Manafort’s defense painted Rick Gates as a serial liar, embezzler and philanderer during a withering cross-examination Tuesday, saying the former Manafort aide led a “secret life” funded by money he pilfered during the decade the pair worked together.
Gates has told the court in the Virginia trial that Manafort, a longtime GOP operative, used a web of offshore companies to receive tens of millions of dollars from wealthy Ukrainian businessmen — and sought to avoid U.S. taxes. After nearly four hours on the stand for the prosecution, Gates became the defense’s punching bag, producing what is likely to be the highest-stakes confrontation of Manafort’s tax- and bank-fraud trial.
Lead Manafort attorney Kevin Downing wasted no time before trying to portray the prosecution’s star witness as untrustworthy and unreliable, zeroing in on Gates’ admission in his guilty plea earlier this year that he lied to special counsel Robert Mueller’s team.
Gates admitted Monday that he stole money from his former boss by padding his expenses by several hundred thousand dollars. But on Tuesday, Downing led the former Manafort protégé through a series of payments totaling almost $3 million. The defense attorney suggested there was no way to tell how much Gates stole and how much went to legitimate payments.
Downing repeatedly referred to the inflated expense payments as a “scheme,” language Gates contradicted. “It wasn’t a scheme. I just added numbers to the expense report,” Gates said.
The allegations soon grew personal, as Downing asked whether Gates used the money to pay expenses related to an extramarital affair he had with a woman in the United Kingdom and in other cities around the world.
“There was another Rick Gates. A secret life of Rick Gates,” Downing said.
Gates admitted that he had had an extramarital affair 10 years ago, saying that he met a woman in London during layovers on flights from the U.S. to Ukraine. Downing said the pair met in “a flat” there. He also suggested that Gates paid hotel bills in various places, including Las Vegas, with Manafort’s money. Gates denied having such rendezvous in Las Vegas.
Manafort’s is the first trial stemming from Mueller’s investigation into Russian interference in the 2016 election, but the longtime GOP operative faces charges related to his earlier political work in Ukraine. Manafort, who was President Donald Trump’s campaign chairman for a period in 2016, will face a second trial in September on separate charges of money laundering and failing to register as a foreign agent. Gates was once Manafort’s protégé, but the relationship has soured, and Gates agreed to cooperate with prosecutors earlier this year as part of his plea deal.
“I’m here to tell the truth,” Gates said under an especially sharp line of questioning from Downing, who asked why the jury was supposed to believe him “after all the lies you’ve told.”
“Mr. Manafort had the same path. I’m here,” Gates added. “I’m accepting responsibility. I’m trying to change.”
When Downing pressed Gates to explain various transactions he’d allegedly described to prosecutors and the FBI, the former Manafort aide said in many instances he could not recall them. Among the statements Gates said he could not remember was apparently an admission that he submitted personal expenses when he worked for Trump’s inaugural committee.
“I don’t recall. It is possible,” the witness said.
Downing also pressed Gates on the terms of his plea deal and how it dramatically increased the prospects of a more lenient sentence for the 46-year-old father of four, who initially faced charges similar to Manafort’s for their work in Ukraine.
The defense lawyer initially asked Gates whether he remembered being told by prosecutors he could be sentenced to 290 months in prison in connection with the Virginia tax- and bank-fraud case. Downing then corrected himself, noting that the potential sentence was actually up to 290 years.
Gates said he wasn’t sure, but quipped: “I like your first answer better.”
“I understood it to be quite significant,” Gates said when pressed by Judge T.S. Ellis III for a more specific answer on what he knew his prison sentence could be had he not pleaded guilty. “I knew it was in excess of 50 to 100 years.”
Gates says Manafort tried to avoid paying U.S. taxes
Earlier in the day, under questioning by the prosecution, Gates said Manafort was paid for work on behalf of former Ukrainian President Viktor Yanukovych with funds that initially moved through Cyprus, an offshore banking haven, and later were transferred to the Grenadines in the Caribbean after a banking crisis in Cyprus in 2013.
Manafort’s defense has argued that the money changed hands in Cyprus because the benefactors wanted to keep their fingerprints off it to avoid a potential backlash in Ukraine. But Gates testified that Manafort was insistent on secrecy — at least in part — in order to avoid paying U.S. taxes.
Manafort’s tax-avoidance efforts came as his bottom line took a sharp turn south in 2015 and 2016. His primary Ukrainian clients — Yanukovych and the Party of Regions — were tossed from power, but he continued to work in the country on local elections and with minority parliament members who struggled to pay bills on time.
One exchange introduced as evidence that summed up Manafort’s financial picture came in April 2015, when Manafort emailed Gates about a tax bill that had caught him by surprise.
“WTF,” Manafort wrote his deputy. “How could I be blindsided like this? You told me you were on top of this. We need to have options. This is a disaster.”
On Monday, Gates’ first day on the stand, he avoided eye contact with his former boss, whom he followed onto Trump’s campaign in 2016. Amid a mellower atmosphere in the courtroom, Gates seemed less apprehensive Tuesday, but he still appeared to avoid looking directly at Manafort. (The frostiness didn’t extend to the lawyers: During one morning break in the action, Gates’ attorney, Tom Green, briefly exchanged pleasantries with one of Manafort’s attorneys, Richard Hibey.)
In his testimony, Gates said Manafort would routinely ask him to wire money to pay bills in the U.S. When the money in Cyprus was used, Manafort asked Gates not to inform Manafort’s bookkeeper, Heather Washkuhn, the ex-aide testified.
“Mr. Manafort basically requested that we did not need to inform Ms. Washkuhn of those payments,” Gates said.
Gates also said payments from Ukrainian businessmen were sometimes classified as loans, which helped Manafort lower his tax bills. “At the time, I believe he was trying to decrease the income for that particular tax year,” Gates said.
Trump mentions start piling up
Manafort’s trial has largely avoided mentions of Trump by name. But the hints kept coming on Tuesday.
Prosecutor Greg Andres pressed Gates during his morning testimony to explain how his career tracked with Manafort’s after their work in Ukraine dried up. Gates said he and Manafort had shifted back to the United States by March 2016.
“I went to work on one of the presidential campaigns,” Gates said, referring to Trump without naming him. He said Manafort hired him and later explained that he was getting paid from Manafort’s savings and investments.
Trump’s name surfaced more directly in evidence introduced Tuesday.
Mueller’s prosecutors presented a March 2013 memo written by Gates that detailed a phone call with Manafort on a range of topics, from working on that year’s tax returns to offshore business accounts.
Near the bottom: a line about Manafort’s New York Yankees season tickets — and a note about “tickets going to Trump next week.”
Prosecutors asked Gates in general about the Yankees tickets but didn’t acknowledge the document’s Trump reference. But they displayed the document on the court’s audio-visual system for the entire courtroom to see.
Manafort was nervous about Cypriot bank accounts
At one point, Manafort and Gates were listed as points of contact for the Cypriot bank accounts, but they were assured that information wouldn’t be revealed.
“None of the information on the banking forms was publicly disclosed in any way,” Gates said. “I believe he understood that his name would not be reported, nor would mine.”
But even the possibility of such a disclosure made Manafort nervous, Gates said, particularly after the veteran political consultant and lobbyist became embroiled in a lawsuit. Gates didn’t identify the suit, but it appears to be one Russian oligarch Oleg Deripaska filed in 2014, demanding $18.9 million in connection with a failed attempt to buy a Ukrainian telecommunications firm.
“Mr. Manafort described that he was engaged in a lawsuit with somebody [and] was concerned that somebody might be able to find some information on the accounts and some of the Ukrainian businessmen,” Gates said. As a result, Manafort’s name was deleted from the bank files, and later Gates’ was as well, he testified.
Eventually, the money was moved to companies and bank accounts located in the Grenadines. The man listed as the point of contact on the accounts was Konstantin Kilimnik, a Russian-Ukrainian citizen who worked extensively with Manafort in Ukraine and who prosecutors have said has ties to Russian intelligence services.
Kilimnik also figured into a July 2015 email the prosecutor showed jurors illustrating that Manafort became hard-up for cash after Yanukovych was driven from power in 2014. Kilimnik said they were trying to persuade a benefactor in Ukraine to follow through on a commitment to pay $1 million for work Manafort and his firm did in the 2014 election. Kilimnik said he was attempting to get a partial payment of $500,000 from the businessman and political leader, Sergei Lovochkin.
“This is to calm Paul down,” Kilimnik wrote.
Gates explained: “The payment was significantly overdue. Mr. Manafort was quite upset that the payment had not been sent.”
Gates explains how he stole money
Gates said Tuesday that he began siphoning off money after the accounts were moved to the Grenadines. He said that country required “much more documentation” than Cyprus, so he began preparing forged or dummy invoices that suggested companies providing personal services to Manafort in the U.S. were actually doing business directly with the companies in the Grenadines.
Andres asked Gates whether he’d ever done business with any of the high-end boutiques or contractors Manafort used and paid from his offshore accounts, such as luxury tailors Alan Couture in New York and House of Bijan in Beverly Hills.
“No,” Gates said with a tone suggesting the idea was absurd.
Gates said he understood the impact of those transfers was that Manafort avoided U.S. taxes. “In not reporting the wires that were done and not disclosing Mr. Manafort’s business income it was, in essence, diminishing the amount of income that should be reported on his tax return,” he said.
Manafort sent Gates to France ahead of 2014 FBI interview
Prompted by Andres, Gates acknowledged that both he and Manafort were interviewed by the FBI in 2014 as part of a forfeiture investigation the bureau was conducting with the Ukrainian government.
Gates testified that he met with the FBI before Manafort did and that both men had the understanding that they were not under investigation when they did the interviews.
Before he went in for his interview, Gates said Manafort instructed him to meet with Lovochkin to collect more information about his company. “We didn’t have a lot of information,” Gates said, saying he met Lovochkin in France.
During opening arguments, Manafort attorney Thomas Zehlne said Manafort twice met with the FBI and had “voluntarily agreed” to discuss his Ukraine consulting work. Manafort’s defense has argued that any FBI investigation of Manafort then went dormant until Mueller’s wider Russia probe of the Trump campaign began.
Politico · by Josh Gerstein · August 7, 2018