Monday, August 20News That Matters

Manafort trial day 4: Accountant concedes possible wrongdoing, Manafort's double life



The courthouse where Paul Manafort is being tried is pictured. | Getty Images

People wait in line to enter the Albert V. Bryan United States Courthouse to attend the trial of former Trump campaign manager Paul Manafort in Alexandria, Va. | Mark Wilson/Getty Images

Manafort trial

‘They never told us about any income deposited in foreign accounts,’ Manafort’s accountant told jurors.

An accountant for former Trump campaign chairman Paul Manafort admitted at Manafort’s tax- and bank-fraud trial Friday that she filed tax returns she thought contained false information and that she may have committed a crime in doing so.

Accountant Cindy Laporta said she had a sense that what Manafort and aide Rick Gates told her about funds being transferred into their international political consulting business wasn’t accurate.

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“I prepared the tax returns and communicated with banks based on information that Mr. Gates and Mr. Manafort provided to me that I didn’t believe,” said Laporta, the first witness at the trial to testify under a grant of immunity.

The admission is the first time a witness has acknowledged knowing involvement in potential wrongdoing during Manafort’s trial, where the longtime lobbyist is fighting charges brought by special counsel Robert Mueller. Laporta is one of five people on the Mueller’s witness list for whom the government requested immunity.

Laporta, who works for Alexandria-based Kositzka Wicks & Company, said she sought the immunity because she was concerned about being prosecuted. Her attorney indicated Laporta would invoke her Fifth Amendment rights if forced to testify without immunity.

Laporta said she agreed on 2014 and 2015 tax returns to treat as loans $2.4 million in funds that Manafort’s consulting firm received from offshore businesses, even though she had doubts that they really were loans and got little documentation to back up that claim.

The alleged loans were also recorded in the books of Manafort’s DMP International firm as coming from the consulting firm’s customers, which Laporta found suspicious.

“I had not seen that before. Yes, it was a concern,” Laporta said.

In another exchange, Laporta testified that Gates in September 2015 told her Manafort’s income needed to be reduced so he could afford to pay his taxes. To finesse the situation, Gates instructed her to reduce Manafort’s income by not counting one of his loans.

While Laporta said she followed the instructions, she told Asonye the move was “not appropriate.”

“We can’t pick and choose what’s a loan and [what’s] income,” she explained.

Gates pleaded guilty in a related case in February and agreed to cooperate with prosecutors in exchange for most of the charges against him being dropped. He’s expected to testify against Manafort in the coming days.

The accountant said her requests for details on the loans yielded one or two page documents, not the typical stack of paper with fine-print terms. Asked if the thin documentation was unusual, she replied, “Yes.”

Prosecutors contend the loans were shams, coming from offshore accounts Manafort controlled and designed to inject cash into his struggling business while avoiding tax liability.

Manafort led financial double life, prosecutors say

Earlier on day four of Manafort’s trial, prosecutors advanced their case that the high-flying international political consultant lived a financial double life — hiding overseas bank accounts from his accountants and lying to them about the source of large sums he deposited in U.S. banks.

The testimony further underscored the argument by Mueller’s team that Manafort relied on a complex web of foreign financial entities and transactions to conceal and evade U.S. taxes on millions of dollars he earned from managing and advising foreign political campaigns, particularly in Ukraine several years ago.

Manafort’s defense team, which is fighting off bank- and tax-fraud charges, has suggested that false statements on his tax returns were understandable oversights by a busy man. But prosecutors are working methodically to demolish that position through testimony showing a years-long pattern of deception on Manafort’s part.

An accountant who helped prepare Manafort’s taxes for almost 20 years, Philip Ayliff, testified Friday that he and his colleagues often directly asked Manafort and his top aide, Rick Gates, about possible foreign accounts and other unusual transactions but were never informed about a web of foreign entities prosecutors say Manafort controlled.

“They never told us about any income deposited in foreign accounts,” said Ayliff.

Ayliff said he assumed the exotically-named companies that transferred millions into Manafort’s consulting firm were clients in the consulting work he did abroad, adding that ledgers provided by Manafort’s bookkeeper had described them that way. In fact, prosecutors say, Manafort himself controlled the companies.

Manafort’s bookkeeper testified Thursday that she was unaware that Manafort and Gates had financial accounts in Cyprus and had filed tax returns there. Asked by prosecutor Uzo Asonye whether Manafort’s accountant would have wanted to know that, Ayliff said yes: “It’s worldwide income that they have to report on,” he said. “We want to make sure we’re complying with the law.”

After Manafort purchased a brownstone townhouse on Union Street in Manhattan in 2012, the tax preparers sent Gates an email asking where the money came from. The reply was that it was money that Manafort’s wife, Kathleen had in the bank.

“This came from a savings account of Kathy’s, according to PJM,” Gates wrote back.

In fact, prosecutors allege, Manafort purchased the home by wiring $3 million from a Cyprus-based business, Actinet Trading Limited.

Defense attorneys told jurors earlier this week that Gates, who pleaded guilty and is expected to testify against Manafort, was scamming Manafort — embezzling from him or his company. Gates appears to have acted as an intermediary for Manafort with the tax preparers and accountants on numerous occasions.

Before defense attorneys got their crack at Ayliff Friday, Asonye sought to head off any argument that Gates was freelancing when he answered the accountants’ questions. He asked Ayliff if during the years he dealt with the two men he noticed any disagreement between them.

“Did Rick Gates ever contradict Mr. Manafort?” the prosecutor asked. “Did Mr. Manafort ever contradict Rick Gates?”

“No,” Ayliff answered to both questions.

While some of the email exchanges were intriguing, much of Ayliff’s testimony was painfully tedious, consisting of his reading various lines from several years of tax returns for Manafort and his business.

Manafort’s attorneys are set to cross-examine Ayliff after a lunch break. They signaled part of their defense strategy during a short exchange with U.S. District Court Judge T.S. Ellis III while jurors were out of the room.

Kevin Downing, one of the defendant’s lawyers, requested that the judge let him ask Ayliff a couple of questions about whether the accounting firm maintained all client records in the event of an audit.

Downing said he was planning to make the case that while Manafort may have answered “no” when signing off on tax returns declaring he did not have a foreign bank account, he was not doing it in willful violation of the law since he did submit documents to his tax preparers signaling there were, in fact, such accounts.

“Only a fool would give that kind of information to the accountant” if the client was trying to evade the IRS, Downing said.

Ellis is giving trial participants the morning off Monday, convening court at 1 P.M. “You may play or sleep until then,” he said.

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