UPDATE: Friday's evidence is here.
The Washington Post offers some color on the scene inside the courtroom.
Paul Manafort wore a blue suit, blue shirt and purple tie to court Friday, and chatted amiably with his attorneys upon entering.
He has looked engaged throughout the proceedings – sometimes taking notes, sometimes looking at the attorneys or the witnesses and sometimes folding his hands in front of his face, staring straight ahead. Once on Thursday, he even corrected his own attorney when the attorney told the judge the wrong exhibit number.
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Even as testimony has turned to complicated tax matters, jurors have also appeared engaged. Several are taking voluminous notes in black writer’s notebooks, and virtually all look at the monitors in front of them as prosecutors and defense attorneys zoom in on particular sections of documents they are seeking to highlight.
As for the rest of the day's proceedings, Manafort's lead defense attorney cross-examined the tax preparer after lunch.
Lead defense attorney Kevin Downing’s cross-examination of Philip Ayliff is his first time speaking before the jury in this case. He did not get through his first question before a member of the special counsel shot up with an objection.
Downing started by saying he would be going slowly, because “when we talk about these tax and accounting issues, I look over at the jury –”
Assistant U.S. Attorney Uzo Asonye cut him off, objecting to that characterization.
Downing is of course very familiar with tax and accounting issues; he spent 15 years in the DOJ’s tax division and was actually behind an effort Ayliff described earlier to crack down on unreported foreign bank accounts.
Here, defending Manafort, he asked whether those reporting requirements are sometimes hard to understand.
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... [P]rosecutors are alleging Manafort had total control over dozens of foreign accounts.
Still, Manafort’s attorney again attempted to shift responsibility to Rick Gates.
“Were you backed up year in and year out against filing deadlines?” Downing asked.
“Yes,” Ayliff said. “Did you have difficulty getting information?” Downing asked. “Yes,” Ayliff said. “Primarily that information was provided by Mr. Gates, is that correct?” Downing asked. “Yes,” Ayliff said.
Downing displayed a financial document, atop which sat large block letters proclaiming “This is a loan … per Rick Gates call.”
The next witness up is the first of five to testify under an immunity agreement. Cindy Laporta is another Manafort accountant, one who was willing to break the law on his behalf.
Laporta signed Manafort’s tax returns in 2014 and 2015, taking over for Philip Ayliff when he retired from their firm. With her early testimony, prosecutors sought to show jurors that Manafort – rather than Laporta, his bookkeeper or business partner Rick Gates – were responsible for inaccuracies in his tax documents, and Manafort knew that.
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Laporta testified she viewed Gates as Manafort’s “assistant.”
Asked by Assistant U.S. Attorney Uzo Asonye who was in charge, she said, “Mr. Manafort,” though she noted Gates often gave her information.
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... Laporta, like accountant Philip Ayliff before her, said Paul Manafort never told her about control over foreign companies and bank accounts or about any accountants and tax preparers he had in Cyprus.
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In remarkable testimony Friday afternoon, accountant Cindy Laporta described how Manafort’s business partner Rick Gates asked tax preparers during a call in 2015 to modify the amount of a loan so that Paul Manafort would have to pay less in taxes.
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They ultimately decided on a $900,000 amount because “it resulted in a tax amount that Rick said could be paid,” Laporta testified.
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“I could have refused to file the tax return,” which she said could lead to litigation with Manafort’s firm.
“I could have called Mr. Manafort and Mr. Gates liars, but Mr. Manafort was a long-time client of the firm and I did not want to do that either,” she said.
Asked if she regretted her actions, she agreed; “I very much regret it.” She said she was taking responsibility now.
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Cindy Laporta said the loan reduced Manafort’s income by $900,000, and at his tax rate, that would have resulted in a nearly half-million dollar savings. The testimony is important in that it shows the financial motivation that prosecutors say Manafort had to cook the books.
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... [T]he loan document bore what Laporta said was Manafort’s signature. That is important because defense attorneys have sought to blame financial malfeasance on Gates, and much of Laporta’s testimony has focused on her interactions with him. Manafort’s signature would link him directly to the episode.
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Prosecutors provided email evidence to link Manafort to the misdeeds that Manafort’s defense attorneys have sought to blame on Gates.
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Cindy Laporta [also testified] that she was involved the falsification of documents to help Paul Manafort obtain loans.
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... [And] testified at length Friday about how Rick Gates sent her backdated documents in an effort to help Paul Manafort pay less in taxes and secure loans.
Kevin Downing will get to cross examine Laporta Monday, and Judge Ellis ended the day telling both sides Paul Manafort's tax returns eventually will be made public.
Live updates from The Washington Post:
Prosecutors opened the day telling Judge Ellis they want permission to use charts.
Prosecutors wrote that an FBI forensic accountant reviewed “tens of thousands of documents containing thousands of entries, from approximately 20 financial institutions and 35 companies” to make the charts, which prosecutors said summarize Manafort’s purchases and payments from foreign and U.S. bank accounts.
They said they are alleging that Manafort controlled “17 domestic entities, 12 Cypriot entities, and three other foreign entities, and he “caused over 200 wires to be sent from those entities to domestic bank accounts, entities, or vendors.”
Ellis did not immediately rule on the request.
At around 10:15am ET, Manafort's tax preparer, Philip Ayliff, took the stand again.
Assistant U.S. Attorney Uzo Asonye drilled into what Ayliff knew about Manafort’s business partner, Rick Gates. Ayliff said Gates was “working closely with Mr. Manafort,” and was Manafort’s “right hand” adviser.
Who was in charge, Asonye asked.
“Oh!” Ayliff exclaimed, then added decisively, “Mr. Manafort.”
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Jurors saw each year’s returns for both Manafort’s consulting firm, Davis, Manafort Partners Inc. (later DMP International) and the personal returns for Manafort and his wife, Kathleen.
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Prosecutors allege Manafort lowered his tax burden by disguising some income as loans ...
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... Manafort reported having no foreign bank accounts — which is where prosecutors say the defendant was stashing many millions more from Ukraine.
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With tax documents preparer Philip Ayliff still on the stand, Assistant U.S. Attorney Uzo Asonye flashed for jurors each of Manafort’s tax returns from 2010 to 2014. As jurors peered down at the monitors in front of them in the jury box, Asonye asked Ayliff what Manafort had reported about whether he had any foreign bank accounts.
“None,” Ayliff said, repeating the exercise five times.
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He said no one at the firm told Manafort or Gates to treat loans as income to lower their tax burden. Ayliff also testified that Manafort’s spending on suits, home improvement, landscaping, and property should have been classified as personal rather than business expenses.
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The prosecution finished its questioning of tax documents preparer Philip Ayliff by asking about properties Paul Manafort claimed as rentals on his taxes. That evidence is important because, in seeking to get loans, Manafort attempted to claim these properties were for personal use, which could be evidence of bank fraud.
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At one point, Manafort's attorney presented an interesting argument.
During a break, Paul Manafort’s lead attorney Kevin Downing offered a bit of Manafort’s defense on charges of failure to report foreign banks accounts. Essentially, he argued that if Manafort had known he was doing something illegal, he wouldn’t have been so easy to catch.
“Nobody intending to violate the law would leave the evidence around for his accountant to find it,” Downing said in court.
Judge T.S. Ellis III made the same point, summarizing the defense as, “There’s a trail in these documents that would lead to the truth, and somebody who violated the law wouldn’t have done that.”