(CN) – Paul Manafort found himself in serious financial trouble in 2016 after his long-time patrons in Ukraine were driven from power, federal prosecutors said Thursday, the third day of the former Trump campaign chairman’s trial on fraud and conspiracy charges.
Under questioning by prosecutor Greg Andres, Manafort bookkeeper Heather Washkuhn said her boss’s international lobbying company began hemorrhaging money, losing $630,000 in 2015 and $1.1 million in 2016.
Things got so bad, Washkuhn said, that Manafort at one point risked losing his health insurance because he could not make the payments.
Washkuhn also said that in January 2016, Manafort’s longtime business associate, Rick Gates, asked if he could draw funds from credit line at the Swiss bank UBS.
She said she responded by saying the account was already “fully drawn.”
The conversation occurred one month before Manafort initiated contact with the Trump campaign. Trump hired Manafort in March 2016 and worked for the campaign until August 2016.
Washkuhn also recalled an email exchange she and Gates engaged in about the time Manafort joined the Trump campaign.
She said that in March 2016, Gates emailed her saying “Paul wants to add accrual information [to a profit and loss sheet]. Can you resubmit [the sheet] as a Microsoft Word document since the PDF sent is crooked?”
Washkuhn told him [the bank] couldn’t send him the Word document because it wasn’t company policy. She offered instead to rescan the document but Gates kept at it.
“I’m confused, why can’t you send? Your scanner doesn’t work,” Gates wrote.
She said she offered to send Gates a hardcopy, but he declined the offer.
“Poor system. If it creates electronic records it should be able to print,” he wrote.
Finally he asked her, according to emails displayed in court Thursday, if she could add a $2.6 million accrual to Davis Manafort Partners International for 2015.
“I told him I couldn’t add it that way since we go by cash accrual only,” Washkuhn told prosecutors.
Raising his ire for a third time, Gates shot back an email to the accountant.
“So, none of your corporate clients have accrued income. Doesn’t make sense,” he wrote.
Washkuhn testified that Manafort and Gates later sent several inflated income statements to Citizens Bank, the Federal Savings Bank and Banc of California in 2016 and again in 2017.
She said in one instance, the Banc of California was told Manafort business had made $4.5 million in income when in fact it had only made $400,744.
Washkuhn said she knew the financial statements were phony because several words were misspelled within them, and a necessary disclaimer was missing from the bottom of the page.
On cross examination, defense attorney Thomas Zehnle asked who had access to Manafort’s accounts.
“Was there not a wall between personal and business accounts for Mr. Manafort?” Zehnle asked Washkuhn.
There wasn’t, she said, but before Zehnle could continue, she interrupted.
“[Rick] Gates would sometimes assist [with both types of accounts],” she said.
Though Gates primarily dealt with Davis Manafort Partners items, “Mr. Manafort was the approval source,” for any final decisions or changes, Washkuhn said.
On redirect, prosecutor Greg Andres asked the bookkeeper who told her to “treat loans like they were income?”
“Mr. Manafort,” Washkuhn said.
In all, the bookkeeper spent three hours on the stand. The next person slated to testify is tax preparer Philip Ayliff, an accountant with Kositzkam Wicks & Company, which handled Manafort’s individual and business taxes.
Prosecutor Uzo Asonye described Ayliff as a “substantial witness” and said he would likely be on the stand for several hours.
Manafort has pleaded not guilty to the charges against him. He faces a second trial in Washington, D.C. in September.