- Rick Gates, Paul Manafort’s former right-hand man, testified Tuesday that he cheated Manafort out of millions of dollars to finance an extramarital affair a decade ago.
- Gates also testified to several other exchanges with Manafort that appeared to show the two men conspiring to commit bank and tax fraud at Manafort’s direction.
- The central facet of Manafort’s defense is to throw a wrench through Gates’ credibility.
- Manafort’s lawyers also sought to cast a political shadow over Tuesday’s proceedings when they questioned Gates about what the special counsel Robert Mueller had asked him about his work on the Trump campaign.
- “If they fight this battle on just the facts, it’s a tough case,” one Justice Department veteran said.
ALEXANDRIA, Virginia – Rick Gates, Paul Manafort’s former right-hand man, admitted Tuesday that he cheated Manafort out of millions of dollars to fund an extramarital affair.
Gates’ admission came as he was testifying against Manafort in a high-stakes criminal trial, in which prosecutors have charged Manafort with over a dozen counts related to tax fraud, bank fraud, and a failure to report foreign bank accounts.
Gates was initially a codefendant with Manafort, but he struck a plea deal with prosecutors working for the special counsel Robert Mueller, and he is the prosecution’s star witness in the Virginia case against Manafort.
On Tuesday, Manafort’s attorney Kevin Downing grilled Gates in a lengthy cross-examination.
“There was another Richard Gates, isn’t that right?” he asked. “A secret Richard Gates?”
Lowering his voice, Gates then admitted that he’d had “another relationship” a decade ago, apparently referring to an extramarital affair.
Gates added that the affair took place in London for about two months. He said he embezzled money from Manafort to fund the affair, which included flying first class, staying in high-end hotels, and keeping a separate apartment in London.
Testy email exchanges
On Monday, Gates admitted to embezzling “several hundred thousand” dollars from Manafort by falsifying expense reports that were reimbursed by some of the offshore accounts prosecutors say were controlled by Manafort.
On Tuesday, Gates said the money he used to fund his affair came from bonuses. Earlier in the day, prosecutors showed emails to the jury between Manafort and Gates that appeared to confirm Gates’ testimony that Manafort sought to commit tax and bank fraud by moving money his consulting firm made from Ukraine through multiple offshore accounts located in Cyprus.
Gates said there were “hundreds” of those emails.
In one email – subject line “Payments” – Gates proposed transferring money from one of Manafort’s shell companies to their political consulting group, Davis Manafort Partners International.
“Unless you approve otherwise,” Gates wrote.
Manafort responded: “This works. Proceed as you lay it out below.” He signed the email with his first initial.
In another email exchange, Manafort expressed frustration while he and Gates were discussing his anticipated income taxes for the year 2015, which had come out to be higher than what they’d expected.
Manafort was also facing significant financial turmoil in 2015 because that was the year his firm lost its biggest client, Viktor Yanukovych, who was ousted from the Ukrainian presidency in 2014 amid widespread demonstrations against his government.
Manafort’s former bookkeeper, Heather Washkuhn, testified last week that Manafort’s firm made just $338,542 in 2015 and reported a loss of $1.2 million in 2016. She also said Manafort was increasingly late in paying his bills and that at one point he needed more than $1.1 million to pay off his expenses.
In an April 2015 email to Gates, Manafort wrote of the higher income taxes, “WTF.”
“How could I be blindsided like this,” he wrote to Gates. “You told me you were on top of this. We need to discuss options. This is a disaster.”
Five months later, Gates got on a conference call with Manafort’s tax preparers and asked them to alter the amount of a loan so Manafort would owe less in income taxes.
Cindy Laporta, one of Manafort’s accountants who was on the call, testified that Gates said Manafort’s tax bill was “too high” and that Manafort “didn’t have the money” to pay it.
“He was trying to reduce income and therefore, income taxes,” Laporta testified.
Defense tries to discredit Gates in the eyes of the jury
Downing asked Gates on Tuesday: “After all the lies you’ve told, you expect this jury to believe you?”
“Yes,” Gates replied. He added that he was “here to tell the truth” and to take responsibility for his actions.
The central facet of Manafort’s defense is to throw a wrench through Gates’ credibility, and Manafort’s lawyers went all-in on that front on Tuesday.
But they appeared to hit a snag when they began to question Gates about what Mueller had asked him about his work on the Trump campaign.
After prosecutors objected to the line of questioning, US District Judge T.S. Ellis III significantly curtailed the defense’s questions.
Gates did testify, however, that it was “possible” he embezzled from Trump’s inaugural committee as well.
The defense’s attempt to cast some political tilt to Tuesday’s proceedings is not altogether surprising.
“If they fight this battle on just the facts, it’s a tough case,” the former federal prosecutor Jeffrey Cramer said.
“If you’re a defense lawyer, you want to talk about anything other than the facts here,” he continued. “So if you can taint the investigation as political in nature or a witch hunt, especially now, your hope is that it’ll resonate with at least one juror and get your client off the hook.”