Manafort defense questions star witness Gates about ‘secret life’

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ALEXANDRIA, Va. (Reuters) – The star witness in the trial against former Trump campaign chairman Paul Manafort faced tough questioning on cross-examination on Tuesday about a “secret life” that included an extramarital affair and stealing funds from his former boss.

Rick Gates, who served as a right-hand man to Manafort in his political consulting business for a decade, acknowledged maintaining a flat in London for the affair, inflating expense reports and a long list of other misdeeds.

“In essence, I was living beyond my means,” Gates testified. “I’m taking responsibility for it. I made a mistake.”

Gates, who is cooperating with U.S. Special Counsel Robert Mueller’s investigation into Russian meddling in the 2016 U.S. election, testified on Monday that he helped Manafort doctor financial statements, hide foreign income and evade hundreds of thousands of dollars in U.S. income taxes.

Under questioning by defense attorney Kevin Downing on Tuesday, Gates acknowledged writing a fraudulent letter to prospective investors in a movie project and possibly submitting personal expenses to Trump’s inaugural committee for reimbursement. Gates also worked on the campaign.

Downing sought to portray Gates as an inveterate liar, raising questions about whether he has been truthful with Mueller even when he cut a plea deal in February in which he admitted to lying to investigators and conspiring to defraud the United States.

“After all the lies you told you expect this jury to believe you?” Downing asked Gates, who responded that he did.

“I’m here to tell the truth,” Gates shot back. “Mr. Manafort had the same path. I’m here.”

Undercutting Gates’ credibility is the foundation of Manafort’s defense. Manafort, 69, has pleaded not guilty to 18 counts of bank fraud, tax fraud and failing to disclose foreign bank accounts containing tens of millions of dollars earned from work for Russian-backed politicians in Ukraine.

The charges in federal court in Alexandria, Virginia, largely predate the five months Manafort spent on Trump’s campaign.

On Monday and earlier Tuesday, Gates testified that he and Manafort had engaged in numerous improper financial maneuvers involving their work in Ukraine, but Gates, 46, pinned the responsibility on Manafort.

When it was his turn for questioning, Downing accused Gates of having a “separate, secret life” with his lover in London and of using business expenses to pay for the affair, including an apartment in the British capital.

“There is a period of time over 10 years ago when I had a relationship, yes,” Gates said.

He also acknowledged writing a fraudulent letter to prospective investors for a movie project involving Steve Brown, a business associate.

“You committed fraud with Mr. Brown as a favor?” Downing asked him.

Gates replied: “I did. I admit to that.”

Manafort’s trial is the first on charges brought by Mueller’s office. While outside the scope of the trial, Mueller is also investigating whether Trump campaign members coordinated with Russian officials, an allegation President Donald Trump denies.

Gates pleaded guilty to lying to investigators and conspiring to defraud the United States.

Questioned by prosecutors earlier on Tuesday, Gates testified that Manafort instructed him not to tell their firm’s bookkeeper about payments from accounts in Cyprus that held millions of dollars in earnings from consulting work for pro-Russian politicians in Ukraine.

There were hundreds of emails showing Manafort approved payments out of the Cypriot accounts, he said.

Gates’ testimony was part of the prosecution’s effort to prove that Manafort was responsible for financial maneuverings that he and other witnesses have testified include filing false tax returns and failing to report foreign bank accounts.

One part of Gates’ testimony led to some laughter in the courtroom.

“Not happy. I just saw this. WTF,” Manafort wrote to Gates in an email entered into evidence showing Manafort’s reaction when he learned how much money he would have to pay in 2014 taxes.

Gates said that he helped create documents to convert some income to a loan to lower Manafort’s tax bill.

“You created a loan agreement for a loan that didn’t exist?” prosecutor Greg Andres asked him. “Yes, we did,” he replied.

He testified about a complex scheme in which earnings from Manafort’s political work in Ukraine would be paid by Ukrainian businessmen using companies in Cyprus to other Cyprus-based companies controlled by Manafort.

Prosecutors showed contracts laying out that Manafort would be paid $4 million a year in quarterly installments of $1 million, all channeled through Cyprus. The funds were logged as loans in order to meet later audits in Cyprus that required documentation of transfers between bank accounts, but Gates testified they were in fact compensation to Manafort.

“A lot of these loan agreements are backdated,” Gates said.

Money from the Ukraine work dried up after pro-Russian President Viktor Yanukovych was forced from power in 2014, Gates testified. A $1 million payment for work in 2014 was “significantly past due” and “Mr. Manafort was quite upset the money had not been sent,” Gates told the court.

Paul Manafort (L), former campaign chairman for U.S. President Donald Trump, in Washington, DC, U.S., December 11, 2017, and Rick Gates, former campaign aide to Trump, in Washington, U.S., December 11, 2017 are pictured in this combination photograph. REUTERS/Joshua Roberts/File Photo

Manafort’s Kiev-based aide Konstantin Kilimnik was able to collect $500,000, Gates said, but “to my knowledge it was never paid in full.” Kilimnik was indicted in the Mueller investigation in June.

Reporting by Sarah N. Lynch, Nathan Layne and Karen Freifeld; Additional reporting by Lisa Lambert; Writing by Warren Strobel; Editing by Grant McCool and Lisa Shumaker

Our Standards:The Thomson Reuters Trust Principles.



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