Updated at 8:23 p.m. ET
Paul Manafort’s former business partner Rick Gates underwent hours of brutal cross-examination on Tuesday in a vicious courtroom battle over his credibility.
Gates is the marquee witness in the government’s case against Manafort, who stands charged with bank and tax fraud.
After Gates described the intricate financial web he says he and Manafort spun to commit financial fraud together, defense attorneys battered Gates with questions about an extramarital affair and asked why anyone should put any stock in what he says now.
Gates has pleaded guilty to conspiracy and other charges in exchange for leniency from prosecutors as part of the deal in which he is testifying against his former patron.
Manafort’s lawyers have seized on that.
“This jury is just supposed to believe you after all the lies that you’ve told and the fraud you’ve committed?” asked Manafort defense attorney Kevin Downing.
“Yes, because I’m here to tell the truth and take responsibility for my actions,” Gates said. “Mr. Manafort had the same path. I’m trying to change.”
That exchange came toward the end of more than 6 1/2 hours on the witness stand in which Gates recounted what he called a broad scheme to help Manafort.
The two men hid money from the IRS in international bank accounts and lied to banks so Manafort could qualify for loans after his income dried up, according to the evidence presented in court.
Manafort is charged with 18 counts of tax and bank fraud. Gates was indicted at the same time as Manafort last year; he pleaded guilty in February.
Part of that agreement included admitting to having lied to investigators working with the office of Justice Department special counsel Robert Mueller. Downing seized on that admission, and the fact that Gates is probably avoiding decades of potential prison time by working with investigators. He questioned Gates’ trustworthiness and his motivations for working with prosecutors.
Downing also broached an extramarital affair that Gates carried on 10 years ago — a “secret life,” as Downing put it — in an apparent effort to taint his reliability as a witness.
“I acknowledge I had a period of time where I had another relationship,” Gates said.
He also admitted to having embezzled hundreds of thousands of dollars from Manafort, in the form of fake and inflated expense reports.
Defense attorneys not only want to damage Gates’ trustworthiness but buttress their narrative that Manafort did not keep a close eye on his finances. If there were problems with his financial paperwork, the defense lawyers have argued, it was because Manafort made honest mistakes or he was a victim of what they’ve called Gates’ perfidy.
Manafort defense attorney Thomas Zehnle said in his opening statement last week that it was actually Gates who orchestrated the bank and tax fraud that Manafort is accused of and that Manafort was unaware of any wrongdoing.
“Rick Gates had his hand in the cookie jar, and he couldn’t take the risk that his boss might find out,” Zehnle said.
The government’s case
Prosecutors have sought to bolster their case that Manafort was the mastermind by showing the jury email chains in which he is directly involved with discussing the alleged financial crimes. The government’s lawyers also have asked other witnesses questions intended to draw out that theme.
“In most instances, it was clear that Mr. Manafort knew what was going on,” said Cindy Laporta, a tax accountant for Manafort who also dealt with Gates. She testified on Monday.
Even so, hearing that Gates was able to steal so much money from Manafort without being caught cast doubt on how involved Manafort truly was — and Judge T.S. Ellis III noted as much.
At one point, Gates said Manafort was “very good at knowing where the money was and where it was spent.” The judge interjected to say that he thought Manafort couldn’t have been that good if he didn’t notice the money Gates stole.
Gates is set to take the stand again for more questioning from Downing when court resumes on Wednesday. Then prosecutors are expected to try to rehabilitate his image in the eyes of the jury and question him again.
The fraud scheme
Before cross-examination began, Gates spent Tuesday morning answering questions from prosecutors.
As Manafort’s former business partner and right-hand man, Gates testified in granular detail about how the two men used bank accounts in Cyprus and a middleman lawyer nicknamed “Dr. K” to hide and receive payments from Ukrainian oligarchs.
“I believe [Manafort] understood his name would not be represented, nor would mine,” Gates said.
When asked by prosecutor Greg Andres who controlled the overseas accounts, Gates responded: “[Manafort] always had control.”
“And whose money was in those accounts?” Andres followed.
“Mr. Manafort’s money,” Gates said.
Gates also testified about falsifying mortgage documents and lying to banks to help Manafort qualify for loans.
Prosecutors want to prove that Manafort acted with intent and did not just make unassuming mistakes. To that end, Gates reiterated that Manafort directed the actions he took and remained closely involved.
Jurors were shown an email in which Manafort responded “WTF” when confronted with how much he would have to pay in taxes if he did not make efforts to adjust his taxable income one year.
“Why can’t you say embezzlement?”
Gates clearly had a simpler time answering questions from prosecutor Andres than he did those from Downing. At one point, Gates characterized his taking money from Manafort via the expense reports as “an unauthorized transaction.”
“Why can’t you say embezzlement?” Downing asked.
“It was embezzlement from Mr. Manafort,” said Gates.
Downing, at another point, called Gates out for having a more difficult time remembering things when he was doing the questioning compared with when Gates was being questioned by the government’s lawyers.
“Have they confronted you with so many lies you can’t remember any of it?” Downing asked.
Gates first took the stand late Monday afternoon, drawing gasps from the packed courtroom in Alexandria, Va., when his name was announced as the next witness.
Within the first hour of his testimony, Gates said explicitly that he broke the law with Manafort, including by providing false and doctored documents to banks in an effort to inflate Manafort’s income to qualify him for loans.
Gates also said he lied to accountants working on Manafort’s taxes, to conceal foreign bank accounts that prosecutors say Manafort used to hide tens of millions of dollars from the IRS.
“At Mr. Manafort’s request, at different points in the year, we did not disclose the foreign bank accounts,” Gates said.
Prosecutors say Manafort did lucrative political consulting work in Ukraine and then kept much of the money he made in offshore accounts and companies. He would then use overseas wire transfers from those secret accounts to buy luxury items like custom suits and a Land Rover — and avoid paying taxes.
When his consulting work dried up after the change of power in Ukraine, prosecutors say, Manafort turned to loans to maintain his lifestyle. The government’s lawyers say he qualified for them by lying to lenders.
Trial touches on campaign
Manafort served as Donald Trump’s campaign chairman for a time in 2016 and Gates was his deputy in that role, too. That chapter, for the first time, was touched on in court on Tuesday.
After Trump’s election, Gates went to work for the then-president-elect’s inauguration committee. Gates said Tuesday that even though Manafort had resigned his post within the campaign months prior, Manafort reached out in November 2016 about trying to push for Federal Savings Bank CEO Stephen Calk to be nominated as secretary of the Army.
Prosecutors say Federal Savings Bank was one of the banks that lent to Manafort and that Manafort committed fraud in applying for the loan by doctoring a document to inflate his income.
Defense attorneys pointed out long before the trial began that Manafort has not been charged with conspiring with the Russians who attacked the 2016 election — the main focus of Mueller’s investigation.
Bill Coffield, a D.C.-area attorney who specializes in white-collar law, says prosecutors needed to use Gates’ testimony to flesh out the narrative of Manafort’s alleged crimes, but they also must continue to back it up with documents and other witnesses who dealt with Manafort’s finances.
“What the prosecution needs to do is put some meat on the bones,” Coffield told NPR’s Morning Edition. “They’ve got somebody whose credibility — talking about Rick Gates here — they’ve got somebody whose credibility has been severely wounded.”
The judge, Ellis, has also taken on an outsize role throughout this trial, and that has continued into the second week.
On Monday, he clashed with prosecutors over the pace they were taking, as they sought to detail Gates’ travel history to and from Ukraine.
“Let’s get to the heart of the matter,” Ellis interrupted.
“Judge, we’ve been at the heart …” Andres said.
“Just listen to me!” Ellis responded.
Later in the day, Andres apologized and Ellis accepted, saying: “I’m not concerned about that at all. I remember trying cases.”
The judge pushed back on prosecutors last week too.
When they tried to illustrate Manafort’s wealth, Ellis stopped them, saying it wasn’t a crime to be rich. When they tried to talk about the Ukrainian oligarchs who paid Manafort, he said it “wasn’t the American way” to bias a jury against a defendant based upon the people he chooses to surround himself with.
On Tuesday, however, he seemed to interrupt both prosecutors and the defense less than he had in previous days.