Aug 6, 2018
Rick Gates says he lied for years at Manafort’s request and stole from him in the process I Top Headline I Evening Edition i The Washington Post
August 6 at 6:10 PM Email the author
Rick Gates — the star witness against President Trump’s ex-campaign chairman — admitted in federal court Monday that he committed a host of crimes with his former boss, and confessed to stealing from him and others.
In his first hour on the witness stand, Gates catalogued years of crimes, saying most of his wrongdoing was committed on behalf of his former boss, Paul Manafort, while other crimes were for his own benefit, including the theft of hundreds thousands of dollars. Gates also made clear he was testifying against Manafort in the hopes of receiving a lesser prison sentence, having pleaded guilty in February as part of a deal with special counsel Robert S. Mueller III.
Wearing a blue suit and gold tie, Gates strode to the witness stand in Alexandria, Va., federal court shortly after 4 p.m., and did not waste much time before cutting to the heart of the issue.
“Did you commit crimes with Mr. Manafort?” prosecutor Greg Andres asked Gates.
“Yes,” Gates responded.
As he answered questions, Gates kept his eyes on the prosecutor. Manafort, seated at the defense table, stared intently at his former business partner.
Presented with a copy of the plea agreement he signed, Gates said he conspired with Manafort to falsify Manafort’s tax returns.
Andres asked Gates whether he understood that his lies and omissions were illegal.
“Yes,” Gates said.
When asked why he had lied, Gates said he had done so at Manafort’s request.
Gates said he and Manafort had 15 foreign accounts they did not report to the federal government, and they knew it was illegal.
“Mr. Manafort directed me” to not report those accounts, Gates testified.
Gates also said Manfort had directed him to report money wired from his foreign bank accounts as loans, rather than as income, to reduce Manafort’s taxable income. By reporting it as a loan, Gates explained, Manafort could defer the amount of taxes he owed.
Gates said that even while he was committing crimes with his boss, he was also stealing from him.
He testified that he had control over some of the Cyprus bank accounts that held Manafort’s money, and created phony bills to siphon off hundreds of thousands of dollars.
“I added money to expense reports and created expense reports” that were not accurate, he said, to pad his salary by “several hundred thousand” dollars.
That testimony likely explains one of the minor mysteries of the first week of the Manafort trial.
As employees of various stores and service providers testified last week about Manafort’s spending millions of dollars on suits, home entertainment systems, and cars, some of the witnesses were shown phony invoices from those firms. It now appears those phony invoices may have been part of Gates’ scheme to embezzle money from his boss.
Gates testified that he had embezzled from other employers as well and that he volunteered that information to investigators once he began cooperating.
Gates said he also told prosecutors he had lied in a deposition in a civil case against Manafort involving a private equity fund.
As part of his plea deal, Gates said prosecutors agreed not to pursue charges on those matters, and drop a second indictment against him in Alexandria accusing him of bank and tax fraud. Gates said he was guilty of those crimes, having wired money from Cyprus through the United Kingdom to the U.S. without paying taxes on it for himself. He also admitted wiring money from Cyprus for Manafort that was not declared as income.
Asked if he got any personal benefit from Manafort’s falsified loan applications, Gates responded, “No, I did not.”
Repeatedly, Gates insisted that most of his crimes were committed at Manafort’s explicit instruction. At one point, he rattled off the names of a dozen overseas companies he said Manafort controlled; on prompting from prosecutors he identified three more. The money in them “came from income from political consulting in Ukraine,” he said.
Gates described for the jury how the two first met — at a Christmas party at Manafort’s house, when Gates was working as an intern.
Gates said as he worked for Manafort over the years, his duties increased, but he still considered himself merely “an employee of the firm,” and he believed Manafort thought of him the same way. The two did not socialize outside of work, Gates said.
When the lawyers interrupted the questioning for a sidebar with U.S. District Court Judge T.S. Ellis III, Gates sat in the witness chair, staring straight ahead, not looking at Manafort. Manafort took a few notes and seemed at one point to chuckle to himself.
Manafort and Gates were indicted together last year on dozens of charges that they conspired together to hide millions of dollars from the IRS in foreign bank accounts, and when their cash flow dried up, submitting false information to banks to get loans.
In February, Gates decided to plead guilty to lying to the FBI and conspiring against the United States, as part of a deal struck with prosecutors to provide evidence against his longtime business partner.
Gates admitted to lying to the FBI that month even as he was trying to strike a plea deal with prosecutors, and to conspiring against the United States. In Gates’ testimony, the six-man, six-woman jury will have to decide whether they believe an admitted liar when he says many of his lies were ordered by his boss.
The jury began hearing evidence in the Manafort case last week, starting with the details of Manafort’s seven-figure lifestyle. They also heard testimony from Manafort’s former accountant and bookkeeper about how Manafort, with help from Gates, repeatedly denied having foreign accounts to report to the IRS, sought to reclassify payments as loans so he didn’t have to pay taxes on the payments, and altered information in loan applications.
Manafort’s defense strategy has been to argue that he may have made mistakes in his taxes, but he did not lie, and the real criminal in the case is Gates.
That strategy played out Monday as prosecutors and defense lawyers sparred over the testimony of one of Manafort’s accountants, Cindy Laporta. Laporta testified Friday that she knowingly submitted false information to the IRS and to banks so her client could save money in taxes or qualify for loans.
She was granted use immunity to testify against her former client — meaning she won’t be charged with any crimes based on the admissions she made on the witness stand about her role.
Manafort’s lawyer, Kevin Downing, tried to undercut the prosecutors’ case by getting Laporta to concede that Manafort’s finances were complicated, and that Gates was deeply involved in the process.
How Manafort’s New York properties were classified on his taxes changed some years, and she agreed that keeping track of those changes was “difficult to follow.”
Prosecutors charge Manafort deceived banks about the status of his properties to get loans and get a more favorable lending rate. Downing sought to portray those same actions as mistakes, not intentional lies.
Under Downing’s questioning, Laporta also conceded that she “relied on Rick Gates’ facts” as to how each property was used.
In response, Assistant U.S. Attorney Uzo Asonye asked a series of questions designed to show that Manafort’s tax claims were not that complicated.
He asked Laporta if she was confused about Manafort’s Manhattan condo, if it took a certain expertise to know that the date on a document appeared false, or if it took expertise to know it is wrong to disguise income as a loan.
“No... no... no,’’ she answered to the questions.
“Did you need to be an expert to know that that was wrong?’’ the prosecutor asked.
“No,” she said.
The trial over Manafort’s taxes and loans are expected to last another two weeks, but the judge has been pressing prosecutors to move quickly through their witnesses and it could end sooner than that.
The tensions between the judge and the prosecution team boiled over again late Monday as prosecutors attempted to introduce Gates’ passport as evidence of his travels to Ukraine and Cyprus. Judge Ellis interrupted them.
“Let’s get to the heart of the matter,” he scowled.
“Judge, we’ve been at the heart…” prosecutor Greg Andres interrupted.
“Just listen to me!” Ellis bellowed from the bench.
Ellis told Andres he was looking for ways to “expedite.” Andres responded, “We’re doing everything we can to move the trial along.”
Minutes later, the judge snapped “next question” when another prosecution inquiry angered him. “The government…” Andres started to say, before Ellis again barked: “Next question.”
Separately, Manafort faces a second trial in the District in September, on charges that he failed to register as a lobbyist for a foreign government, and conspired to tamper with a witness in the case. The conduct surrounding those charges allegedly occurred after his indictment, so Manafort’s bail was revoked and he has been living in a federal jail in Alexandria while he fights the two cases against him.
Justin Jouvenal contributed to this report.