Star U.S. witness Gates testifies he committed crimes with Manafort

CAIRO – 7 August 2018: Rick Gates, a longtime business associate of U.S. President Donald Trump's former campaign chairman Paul Manafort, on Monday testified at trial that he helped Manafort file false tax returns and did not disclose foreign bank accounts.

Gates was expected to be a star witness in the government's case against Manafort having pleaded guilty in February and agreed to cooperate with prosecutors under a deal that could lead to a reduced sentence.

"We did not submit the required form designating he had control over an offshore account," Gates told the jury in federal court in Alexandria, Virginia, on the fifth day of the trial.

When prosecutor Greg Andres asked why, Gates replied: "At Mr. Manafort's direction."

Gates also testified he and Manafort knew it was a crime because they had been notified by Manafort's accountants in emails.

Manafort's attorneys have signaled they will seek to blame Gates and have accused him of embezzling millions of dollars from Manafort. Gates and Manafort have known each other for two decades and ran a multimillion-dollar political consulting business. Gates also worked for the Trump election campaign.

Manafort has pleaded not guilty to 18 counts of bank and tax fraud and failing to disclose foreign bank accounts. The charges largely predate his five months on the Trump campaign but were the first to go to trial arising from Special Counsel Robert Mueller's investigation into Russian interference in the 2016 U.S. election.

The jury has heard how Manafort made tens of millions of dollars for work with pro-Russian politicians in Ukraine. Mueller is also investigating possible coordination between Trump campaign members and Russian officials in the election campaign, but the charges against Manafort do not address that.

Prosecutors on Monday went through a list of overseas corporations and Gates testified that all of them were controlled by Manafort and contained income earned by his political consulting work.

Gates said an associate, Konstantin Klimnik, had control over the overseas accounts. Klimnik is a Russian-Ukrainian political consultant who was indicted in June on charges stemming from the Mueller probe.

Gates testified that Manafort directed him to report overseas income as loans in order to lower taxable income and that at Manafort's request, did not disclose foreign bank accounts, which is required by law.

The jury had heard testimony on Friday and Monday from accountant Cynthia Laporta, who described how Manafort and Gates doctored financial statements and backdated loans.

In questioning Laporta on Monday, a prosecutor asked the accountant about a $10 million loan purportedly received by Manafort from Russian businessman Oleg Deripaska in 2006. Laporta, looking at a summary of loans to Manafort and his businesses, said she could not see any indication that the loan from Deripaska had been paid off.

Since the trial started before U.S. District Judge T.S. Ellis last Tuesday, Manafort's lawyers have kept their cross-examinations brief and at times refrained from attempting to rebut damaging testimony in detail.

But Laporta's testimony raised the stakes for Manafort, legal experts said. Testifying under immunity, she was the first witness to admit she knew accounting maneuvers Manafort and Gates requested of her were wrong and could be crimes. One accounting trick saved Manafort $500,000 in taxes, she said.