Manafort Trial: Day Six

News  |  Aug 7, 2018

UPDATE: Day Six trial exhibits here

Read more about the rest if Gates' Tuesday testimony and how he fared under cross-examination here


Rick Gates returned to the stand Tuesday morning to continue answering questions.

Live updates via The Washington Post:

[P]rosecutors said they expect to question their star witness for another three hours. After that, Paul Manafort’s defense attorneys will get their turn to inquire of Gates. Factoring in breaks and lunch, his testimony could be the only that jurors hear on Tuesday.

10:17 a.m.: Rick Gates explains how Ukrainian billionaires paid Manafort

Rick Gates resumed his testimony Tuesday morning by explaining how and why Paul Manafort was paid for his work in Ukraine through companies in Cyprus.

“He indicated that the Ukrainian businessmen wanted us to set up Cyprus bank accounts,” Gates testified, because the Ukranian businessmen already had accounts there and could easily wire money that way.

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Gates explained that he and Manafort would work out consultancy agreements and a payment structure with the billionaires backing the Party of Regions. Manafort or another employee, Konstantin Kilimnik, would draft an agreement that would be approved by their Cypriot law firm.

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Gates also testified that some of the payments were for a “lobbying campaign in the U.S. and the U.K.” — an issue not in this case but in Washington, D.C., federal court, where Manafort is accused of failing to register as a foreign agent.

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10:35 a.m.: Gates gives primer on shell companies

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Powerful Ukrainian businessmen would set up a company in Cyprus and use that company to pay a different company set up by Manafort in Cyprus. But neither the businessmen nor Manafort would sign the documents governing the payments. Instead,  paid Cypriot directors signed for both sides.

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Gates told the jury that neither Manafort’s bookkeepers nor the company that prepared his taxes were made aware of the companies.

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All of the testimony goes to the heart of the prosecution’s case, which alleges that Manafort accepted millions in payments through his offshore companies without disclosing the accounts to the IRS and that he disguised some income as loans to avoid paying taxes on it.

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Gates said that Manafort’s last payment in Ukraine came in late 2014. This is key because prosecutors argue that it was the end of Manafort’s Ukrainian fees that caused him to turn to bank fraud to find revenue to support his lavish lifestyle.

10:52 a.m.: Gates describes how the money dried up

The overarching narrative of prosecutors’ case is that after Ukrainian presidential candidate Viktor Yanukovych was ousted from power and Paul Manafort’s money ran dry, the political operative turned to fraud to maintain his lavish lifestyle. Rick Gates, who worked with Manafort for Yanukovych, testified about their financial woes Tuesday.

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10:57 a.m.: Gates: Manafort grew worried when his name appeared on account

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Importantly for prosecutors, Gates made clear that no matter the name on the accounts, they were ultimately controlled by Manafort. Jurors were shown one  2011 email in which Manafort explicitly approved a money transfer from one of the accounts to his company, DMP International. Among the charges Manafort faces is failing to report foreign bank accounts.

11:18 a.m.: Gates explains FBI interviews in 2014

Rick Gates testified that he and Paul Manafort were asked to come in for voluntary interviews as part of a joint FBI and Ukrainian “forfeiture investigation” in 2014.

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He said Manafort asked him to meet with Serhiy Lyovochkin to “notify him and determine the status of his Ukrainian company” because a lot of their payments came from him.

“We didn’t know a lot about” the company, Gates said. They met Lyovochkin in France, he said, and he answered their questions. He also agreed to start paying Manafort through one bank rather than through international wire transfers, Gates said.

11:25 a.m.: Gates explains mystery invoices

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When Manafort moved his banking from Cyprus to the Grenadines, Gates explained, they required more documentation. “They asked for invoices” that had the name of the companies Manafort was using on them, Gates said. So at Manafort’s direction he would make a “modified invoice.”

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He said Manafort directed him to make the payments and to hide them from bookkeeper Heather Washkuhn.

“The U.S. payments were reported to Ms. Washkuhn, the overseas ones were not,” he said. “It was in essence diminishing the amount of money that would have been represented on the U.S. tax returns.”

11:50 a.m.: Gates: Manafort actively hid accounts

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Gates told the jury that he helped coordinate with the accountants who prepared Paul Manafort’s taxes on Manafort’s annual filings. He said that he and Manafort would strategize how to reduce Manafort’s overall tax liability by classifying some income as loans.

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Prosecutors wish to show that Manafort was not just confused but actively hid the accounts. Gates testified that Manafort would tell him that because a Cypriot lawyer they referred to as “Dr. K” has signatory authority of the accounts, he did not believe they needed to be disclosed to the professional accountants.

But, prosecutor Greg Andres asked Gates, who actually had control over those accounts? “[Manafort] always had control,” Gates said. “And whose money was in those accounts?” Andres continued. “Mr. Manafort’s money,” Gates said.

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Gates has been testifying in a clear, matter-of-fact voice. Wearing a navy blue suit, sharp white shirt and a sky blue tie, he appears calm and has shed any nerves he had when he first took the stand Monday.

He carefully addresses his answers directly to Andres, keeping his eyes steered away from where Manafort sits at the defense table. Manafort periodically leans over to whisper at his attorneys but spends long stretches staring directly at his former business partner.

12:14 a.m.: Manafort’s response to large tax bill? ‘WTF,’ Gates testifies.

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Prosecutors showed jurors a familiar, 2015 email in which one of Manafort’s accountants told Gates that in order to reduce a tax bill Manafort was facing, they would have to claim Manafort had an outstanding loan. Gates told jurors that he had been “tasked” by Manafort with initiating the exchange, because Manafort was upset about the taxes he would have to pay.

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Jurors did not just have to take Gates word for it. They were shown an email in which Manafort, confronted with an outline of what he might have to pay in taxes, wrote, “WTF,” an expression that commonly denotes dismay. Gates said Manafort was “not happy.”

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All live updates via The Washington Post

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Related: Gates Details Crimes

Paul Manafort trial Day 6: Gates explains how millions were funneled to Manafort (WaPo)