Paul Manafort, President Trump’s onetime campaign chairman, is on trial in federal court in Alexandria on bank and tax fraud charges. Prosecutors allege he failed to pay taxes on millions he made from his work for a Russia-friendly Ukrainian political party, then lied to get loans when the cash stopped coming in.
The case is being prosecuted by the special counsel investigating Russian interference in the 2016 U.S. presidential election. We’ll have live coverage here throughout Day 4 of the trial.
2:36 p.m.: Prosecutors call first witness to testify under immunity agreement
Prosecutors called as their 14th witness Cindy Laporta – another of Manafort’s accountants. She is the first person to testify under an immunity agreement with the special counsel to prevent her from facing possible legal exposure about what she might say.
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.
Laporta said her firm gave Manafort a letter making clear they were not “auditing or verifying” the information clients provided – and while they offered that service, Manafort used the firm only to prepare his returns. She said she gathered information from Manafort, Gates and his bookkeeper, and “Mr. Manafort approved that.”
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.
That assertion might have been helpful to the defense, which has sought to cast blame for financial irregularities on Gates.
To rebut that, prosecutors showed Laporta a September 2015 email of Manafort forwarding Gates tax documents, which Gates forwarded on to her. She testified that was typical of how she would get Manafort’s tax documents.
A total of five witnesses have been granted immunity to testify at Manafort’s trial.
2:09 p.m. Lead defense attorney speaks before jury for first time
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.
He asked Ayliff, Manafort’s former accountant, whether “that was a lot more complicated than determining whether there was signature control” over a foreign bank account.
Ayliff agreed, saying he was a “generalist” but sometimes roped in other accountants at the firm who specialized in foreign tax issues when dealing with Manafort.
The emails Downing used to make his point, which were entered into evidence by the government, focus on one foreign telecommunications firm in which Manafort was invested but did not have signature authority. The accountants determined that his investment was not large enough to trigger reporting of a foreign bank account.
However, prosecutors 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.”
1:53 p.m. Judge gets combative with prosecutors, again
Judge T.S. Ellis III presides over the naturalization ceremony at Arlington National Cemetary. (Tracy A. Woodward/The Washington Post Staff)
As he has been throughout the trial, Judge T.S. Ellis III was notably combative with prosecutors Friday.
More than once the judge, slouching forward in a roller chair pivoted slightly to one side, critiqued the questions asked by Assistant U.S. Attorney Uzo Asonye. When Asonye asked Paul Manafort’s tax documents preparer, for example, about the accounting methods generally used to prepare tax returns, Ellis told him to make the inquiry more specific.
“Why don’t you ask him on what basis he prepares them on?” Ellis said.
Another time, as Asonye asked broadly about the accountant’s role in putting together Manafort’s tax return, Ellis cut him off. Of course, the judge said, Philip Ayliff was involved in putting together the tax return. Asonye was trying to highlight that Manafort, though, was the one to sign and mail in the document.
“The correct question would be, ‘Did you have any role in mailing it in?’” Ellis said.
Prosecutors have mostly kept their composure in responding to Ellis’s jabs, though the judgeseemed to get under their skin at least once on Friday. The flare-up came when Asonye tried to enter a piece of evidence that was described inaccurately on the list of exhibits Ellis had been given.
“May we approach,” Asonye asked, saying he could clear up the confusion.
“Is it a mistake?” the judge shot back, glowering at the attorney. When Asonye responded with only silence, Ellis relented. “All right. Yes. You can,” he said.
In a huddle next to Ellis’s bench, another prosecutor, Greg Andres, stood close to the judge and gestured emphatically with one of his hands. Though white noise in the courtroom made the conversation impossible to hear, Andres seemed to be speaking animatedly. Ellis soon returned to the bench and told jurors not to worry too much about the episode.
“It’s not a big deal,” he said. “It’s no big mistake.” He explained that there “may be an error in the description” of the item that they would soon to be shown.
“These things happen,” Ellis said. Asonye soon resumed questioning the tax documents preparer.
12:58 p.m.: Attorney: Paul Manafort would not have left evidence ‘around’ if he was trying to break law
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.”
The trial is on lunch break until 1:30 p.m.
12:53 p.m.: Tax preparer discusses Manafort’s rental properties
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.
Assistant U.S. Attorney Uzo Asonye showed jurors an email Manafort sent to Ayliff telling him the bank UBS was raising questions as he attempted to get a loan. Particularly, Manafort told his tax documents preparer, the bank was asking about documents that appeared to show a property on Fifth Avenue in New York, was a rental, when Manafort claimed it was personal.
“It was my understanding it was a rental,” Ayliff testified. “It had always been a rental.”
Asonye showed jurors emails that Manafort had treated a property on Howard Street was used as a rental in 2015 – even though he would claim otherwise in trying to seek a loan. Tax returns show Manafort claimed to have made $115,000 in rental income that year from the property, and he claimed depreciation to reduce his tax obligation.
12:30 p.m.: Tax prepaper delves into suspicious loan
Accountant Philip Ayliff testified that his firm asked Paul Manafort and Rick Gates for documentation of $1.5 million loan from Peranova Holdings in 2012 and got none.
“There normally wasn’t a response,” when the accounting firm, Kositzka Wicks & Company, asked about loans to Manafort’s consulting firm, Ayliff said. “They just said it was a loan.”
It was Rick Gates, Manafort’s deputy, who told the firm in a conference call that $1.5 million should be classified as a loan, Ayliff testified.
“We’d never heard of Peranova Holdings,” Ayliff testified. “We thought it was an independent third party.”
In fact, prosecutors have shown evidence Manafort used Peranova, based in Cyprus, to pay his personal expenses.
Had Ayliff known the $1.5 million was payment for work in Ukraine, the accountant said, on Manafort’s taxes “it would have been income.” Ayliff also said “if they had control over” Peranova, that would also have affected the tax return reporting.
Ayliff said the accountants also asked about the loan in subsequent years, because there were no payments towards it. “We would ask, ‘What’s the status of the loan, is it still outstanding?’” They were told it was.
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.
11:12 a.m.: Tax preparer: Manafort did not report foreign accounts containing millions
A jacket included in the government’s exhibits admitted into evidence, at the trial of Paul Manafort, is shown in this image released from Special Counsel Robert Mueller’s office in Washington, DC, U.S. on August 1, 2018. (Courtesy Special Counsel’s Office)
In early testimony Friday, the prosecution sought to highlight how Paul Manafort repeatedly denied having foreign banks accounts – even though previous witnesses have testified he used foreign accounts to fund his lavish lifestyle.
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 if Manafort had reported about whether he had any foreign bank accounts.
“None,” Ayliff said, repeating the exercise five times.
Asonye then turned to emails between Manafort, business partner Rick Gates and their tax documents preparer, attempting to show it wasn’t just on the returns themselves that Manafort had claimed not to have foreign accounts. One 2011 email showed Ayliff writing to Manafort, asking if he had any interest in a foreign bank account. Manafort responded he did not.
The testimony is important because Manafort is charged with, among other things, failing to report foreign bank accounts as he was legally required to do. Prosecutors must show Manafort’s failing to do so was no mere mistake.
Other emails showed the tax documents preparer inquiring about transactions involving foreign accounts.
In August 2009, for example, he wrote Manafort inquiring about a $1 million transaction that came from Deustche Bank to LOAV Advisors Limited. Jurors saw similar inquiries directed to Gates.
The tax documents preparer said his firm relied on the representation of Gates, Manafort and their books, and the men never told him of accounts or tax information from Cyprus. Jurors already have heard that Manafort made payments from accounts in that country.
Ayliff said he believed the foreign companies were clients of Manafort’s; he did not think Manafort controlled them.
“They never told us about any income that was deposited in foreign accounts,” he said.
10:46 a.m.: With accountant, prosecutors get into the meat of tax crimes
Paul Manafort, left, walks with his wife, Kathleen, as they arrive at the federal courthouse in Alexandria on March 8, 2018. (Jacquelyn Martin/AP)
Prosecutors have now gotten to the nitty-gritty details of Paul Manafort’s alleged tax fraud, going through business and personal returns from 2010 to 2014 with one of his former accountants.
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.
For each of those years, even as the firm reported large receipts, the firm’s reported profits were a fraction of that amount because of high business expenses.
Prosecutors allege Manafort lowered his tax burden by disguising some income as loans, and highlighted one such loan from 2012 — $1.5 million from one of the Cyprus companies the government says he controlled, Peranova Holdings Limited.
On Wednesday Manafort’s bookkeeper Heather Washkuhn testified that his deputy Rick Gates told her in 2016 the loan had been forgiven and should be treated as income on his 2015 returns. That was done, prosecutors say, to inflate Manafort’s income so he could get an actual loan.
Still, in the years he was working in Ukraine, Manafort reported making quite a healthy income. On his individual returns, in 2010 Manafort reported $504,744 in income in 2010.
In 2011, it was $3,071,409. In 2012, $5,361,007. In 2013, $1,910,928, and in 2014, $2,984,210. But, accountant Philip Ayliff testified, Manafort reported having no foreign bank accounts — which is where prosecutors say the defendant was stashing many millions more from Ukraine.
Ayliff is the first witness that Kevin Downing, Manafort’s lead attorney, plans to cross-examine.
Judge Ellis has been a bit softer on prosecutors now that they are delving into the true heart of the case. But he continued to interrupt. When Assistant U.S. Attorney Uzo Asonye asked if Ayliff had any role in Manafort’s gift tax returns, Ellis interjected, “The correct question would be, did you have any role in mailing them?”
10:14 A.M.: Trial resumes with Manafort’s tax preparer taking the stand
Richard Gates (C) arrives at the Prettyman Federal Courthouse January 16, 2018 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)
Jurors returned to the courtroom just after 9:45 a.m. to hear more testimony from Philip Ayliff, Paul Manafort’s tax documents preparer.
After establishing Ayliff’s long relationship with Manafort – the tax preparer said he began working for Manafort in 1997, and met with him 30 times over the two decades since – 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.”
That is important because defense attorneys have sought to cast Manafort as a dupe of Gates. Ayliff seemed to cast doubt on that idea. He said he never saw Gates confront Manafort, or vice versa. Nor, he said, did Gates ever tell him to hide anything from Manafort. He said the two men often conducted calls together where he would discuss their taxes.
9:46 a.m.: Special counsel attorney gets guilty plea (no, it’s not Paul Manafort)
Assistant U.S. Attorney Uzo Asonye, standing, during opening arguments in the trial of Paul Manafort. (Dana Verkouteren via AP)
An attorney for the special counsel’s office appeared in court early Friday as part of a hearing on a guilty plea. But no, it wasn’t Paul Manafort.
Assistant U.S. Attorney Uzo Asonye, one of the lawyer’s prosecuting Manafort, is working an unrelated case at the same time. Asonye was there to hear a guilty plea from a contractor, who admitted to falsifying tests on the D.C. area’s Metro’s Silver Line project.
“Doing double duty, Mr. Asonye,” Judge T.S. Ellis III joked at the outset. Later he asked if Asonye was familiar with a recent Supreme Court ruling on restitution.
Asonye, whom Ellis has chided and interrupted throughout the Manafort trial, responded, “I’m always available to be educated by the court.”
9:24 a.m.: Prosecutors: We’re going to need to use charts
The special counsel’s office on Friday morning told a federal judge they intend to use “summary charts” to help explain their complicated case against Paul Manafort.
The brief request lays out the breadth of investigative work the special counsel conducted in investigating Manafort. 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.”
Judge T.S. Ellis III still has to approve the request. Prosecutors wrote that this was the “prototypical” case to do so because of its complexity.
8:57 a.m.: What to Expect Day 4
On the third day of Paul Manafort’s trial, jurors heard more testimony and reviewed more evidence about his lavish lifestyle. They learned he had a $20,000 video and karaoke system installed in one of his homes, and that he spent hundreds of thousands of dollars on landscaping that included a flower bed in the shape of the letter “M.” As they had been on previous days, jurors were told the purchases were paid for with wired money from foreign bank accounts.
Jurors also for the first time heard from two of the people Manafort tasked with handling his finances – a bookkeeper and an accountant. The bookkeeper began to describe the bank fraud of which Manafort is accused. The accountant’s testimony is expected to continue Friday. He is the 13th witness to testify.
As the trial enters its fourth day, the biggest question will be when Rick Gates, Manafort’s business partner, will take the stand. Prosecutors had earlier in the trial suggested his testifying was not a foregone conclusion, but they affirmed Wednesday that they intend to call him to the witness stand. His testimony will be critical. Gates was accused in the same indictment as Manafort, and prosecutors will rely on him to describe the fraud they say he and his partner carried out.
Manafort’s defense, meanwhile, has sought to cast Gates as a liar who embezzled from Manafort and then tried to cover his tracks. Gates pleaded guilty to conspiracy and lying to the FBI earlier this year.
Through witnesses, prosecutors have laid out the broad outlines of their case. They say Manafort got rich based on work in Ukraine, lived extravagantly while paying no taxes on the money, and then – when the worked dried up – committed bank fraud to maintain his lifestyle. But witnesses still need to fill in some of the details and demonstrate more forcefully that Manafort sought to deceive banks and the IRS.
Testimony is set to resume at 9:30 a.m.