ALEXANDRIA, Va. (CN) – Rick Gates, considered the government’s star witness in the prosecution of Paul Manafort, began testifying Monday afternoon against the former campaign chairman for President Donald Trump.
Clean shaven, in contrast to the full beard that he sported in previous appearances, Gates has been cooperating with the government since pleading guilty in February to conspiracy and making false statements to the FBI.
After confirming for the jury that he has admitted to the criminal charges against him, Gates testified this afternoon that he lied both to Manafort’s tax preparers and to the federal government about the existence of foreign accounts that Manafort used to hide taxable income.
All told, Gates continued, Manafort had more than a dozen overseas companies that he controlled to shield money from taxes. He said several million dollars flowed through the overseas accounts and into the United States.
As to why he transferred money from these foreign accounts, and why he changed how money in these accounts was classified — whether as income or a loan — Gates insisted that he was following Manafort’s instructions.
“That was in order to reduce the taxable income on the tax returns,” Gates added.
Gates said he directly told one accountant that Manafort had no foreign accounts, and that he and Manafort left unchecked a box on Manafort’s tax returns that would have disclosed their existence.
Manafort first hired Gates to intern at Black Manafort Stone Kelly, Gates told prosecutor Greg Andres. He said his first official meeting with the defendant occurred at a 1995 Christmas party at Manafort’s home.
Gates went on to rattle off a list of other Manafort companies that employed him over the years. Referring to Trump, Gates said his last assignment was in 2016 when they worked for “one of the presidential candidates.”
Gates testified that he reported only to Manafort during all this time. That chain of command was followed even when Gates began his work with Davis Manafort Partners International in Ukraine in 2006.
While Manafort was abroad, the men communicated regularly by call or emails. “Sometimes more than once a day,” said Gates, who is wearing a navy suit and gold tie.
He added that meetings occurred at Manafort’s home or office in Alexandria when the men were both in the U.S., or at Manafort’s business office in New York or his apartment.
Gates met with prosecutors at least 20 times in order to prepare for his testimony against Manafort, he told prosecutor Andres on direct examination.
Gates also told jurors that if he violates the terms of his plea deal, he is not entitled to a sentence reduction and his guilty plea will stand.
Gates first began working on political consulting campaigns with Manafort in Ukraine in 2005 when Manafort introduced him to Rinat Akhmetov, a wealthy energy and steel magnate who founded the Party of Regions.
The Party of Regions would one day pay Manafort millions for his consulting, namely for his work in helping party leader Viktor Yanukovych win Ukraine’s presidency.
Akhmetov, Gates said, paid Manafort “through wire transfers from his own shell companies in Cyprus to Manafort’s shell companies in Cyprus.”
Describing Manafort as “one of the most politically brilliant strategists I’ve ever worked with,” Gates said he and the former Trump campaign chair traveled frequently together and he watched up close as Manafort brought Yanukovych’s political career “back from the proverbial dead.”
But when Andres tried to display Gates’ passport to show when and where he traveled with Manafort, U.S. District Judge T.S. Ellis III stopped the prosecutor short, saying the passport was irrelevant.
Andres hit back, saying it was the first time in the trial that there was sharp focus on when and where Manafort and Gates did their work for Ukraine and within a specific timeframe.
“We need to focus sharply on what the indictments are… I hope you don’t intend to give a history of Ukraine, do you?” Ellis said.
“No, but I…” Andres was interrupted.
Ellis barked at the prosecutor: “Next question!”
When Andres tried again, Ellis raised his voice over the attorney.
“Next question,” Ellis said.
The exchange gave way to what appeared to be another heated exchange at the judge’s bench.
During a private conference, where the voices of the judge and attorneys are drowned out by a noise-cancelling machine, Ellis could be seen wagging his finger at Andres at one moment. A few minutes later, Ellis’ voice could be heard just barely over the din of the machine.
After the jury left the courtroom, Ellis argued with Andres over the questions the prosecutor asked Gates about the details of political contributions in Ukraine.
Interested in moving the trial along, Ellis again challenged the relevance over prosecutors’ questions.
The judge said he did not see why Andres needed Gates to explain to the jury that the oligarchs who hired Manafort stood to benefit personally from the candidate of their choice winning an election.
“I don’t ask Mr. Koch or Soros if they have anything to gain from any contributions they make,” Ellis said.
Andres explained he needs to show the flow of money from Ukraine to Manafort and that it was only fair to explain to the jury the true nature of the payments.
Ellis insisted Andres should condense his remaining arguments to speed the trial along, saying the case is not “as complex as it could be made to be.”
The argument was heated at times, with Ellis asking Andres to raise his eyes after the prosecutor looked down.
Ellis then repeated an earlier admonition that attorneys stop rolling their eyes during trial. Insisting he was not being disrespectful, Andres called into question how Ellis could have seen him roll his eyes if he was looking down.
Over the last week of proceedings, Gates’ name has come up repeatedly as prosecutors have questioned an assortment of accountants and tax preparers about their work with Manafort.
Manafort’s attorneys Kevin Downing and Thomas Zehnle are expected to take a more offensive approach with Gates on cross-examination, following an opening statement where Zehnle asserted that Gates orchestrated “a grand conspiracy.”
“Rick Gates got himself in trouble … because he embezzled millions of dollars from his longtime employer,” Zehnle said. “[Manafort] trusted him to do what is right. But he placed his trust in the wrong person: Rick Gates.”
While the government is making the case that Manafort availed himself of every luxury while dodging taxes, the defense argues that it was Gates who masterminded the scheme to funnel Manafort’s money through offshore bank accounts in Cyprus, St. Vincent and the Grenadines, and elsewhere. They hope to persuade jurors that Manafort’s globe-trotting work as a premier lobbyist kept him too busy to mind the store.
Under direct examination this afternoon, Gates described the details of the indictment against him, one that the government dismissed in exchange for his cooperation. Gates said he lied during a deposition at Manafort’s request and that he underreported his income by filing false expense reports with employers.
He said he took “several hundred thousand” dollars from Manafort by submitting falsified expense reports.
All of last week, prosecutors worked to undercut the argument that Gates was the ringleader.
With each witnesses who took the stand, prosecutors asked them to state who they believed was “in charge” when requests landed on their desks.
Every witness who testified gave the same answer: “Mr. Manafort.”
One of the last of this group, accountant Cindy Laporta, returned to the stand this afternoon after testifying Friday that she willingly and knowingly falsified tax returns so that Manafort would get a break on his tax obligations. Laporta told the court that she worked primarily with Gates while preparing taxes for Manafort but that she copied Manafort on emails when Gates was slow getting information to her.
“I think that in most instances it was clear Mr. Manafort was aware what was going on,” said Laporta, who was given use immunity ahead of trial.
Laporta also said she grew frustrated with Gates at times when he did not provide her with critical information on Manafort’s finances, saying she and other accountants at her firm grew to doubt Gates’ credibility.
Responding to questions from Downing, Laporta said she was surprised when Gates told her Manafort did not have enough money to cover the taxes Laporta’s firm estimated he would owe.
She confirmed to Downing today that she often had trouble “believing what Gates was saying” when it came to paperwork submitted to her firm by Davis Manafort Partners or Davis Manafort Partners International.
Downing also asked Laporta to review a spreadsheet that contained a summary of Manafort’s companies, their gross receipts, adjustable gross income and what was reported as taxable income year by year from 2005 to 2015.
After reviewing the spreadsheet, Downing noted there was a reported income of $92.5 million for both Davis Manafort Partners and Davis Manafort Partners International.
The spreadsheet also showed $30 million in “other” reported income and $23 million in taxable income reported. The spreadsheet indicated that $8 million alone was paid on federal income taxes.
The information serves as an integral part of the defense’s strategy made evident so far – that Manafort never intended to hide the funds, as indicated by the hefty amount he reported.
In subsequent testimony Monday, prosecutor Uzo Asonye objected when Downing tried to ask Laporta if it would surprise her to learn that Gates embezzled money from Manafort.
Though Downing argued he should be able to ask the question because Gates is “next up,” Paula Liss, a senior special agent with the Treasury Department’s Financial Crimes Enforcement Network, testified for the government after Laporta was excused.
Manafort’s trial is now in its fifth day.
Among a significant number of Manafort’s emails, financial records and bank statements, prosecutors working under special counsel Robert Mueller showed last week that Manafort spent a $1 million on suits alone – including an attention-grabbing $15,000 jacket made of ostrich leather – and that he spared little expense when purchasing and renovating luxury properties in Florida, New York City and the Hamptons.
During opening arguments, Zehnle emphasized how little time Manafort spent in proper contact with his business associates. Manafort was “often seven or eight time zones away,” while also deeply entrenched in lobbying work in Ukraine, Zehnle said.
Since Manafort couldn’t be “everywhere at once,” his defense said in opening statements, Manafort blindly entrusted the operations of his lobbying firm to Gates, a longtime associate and arguably, friend.
“You will see how Gates will tell untruth after untruth about anyone or anything to save himself from jail and from paying back taxes,” Zehnle said in his opening.