Former Manafort deputy outlines tax evasion scheme

8 August 2018: Rick Gates, the key witness in the trial of Donald Trump's former campaign chief Paul Manafort, described in detail on Tuesday how he helped his ex-boss evade US taxes on millons of dollars for political consulting work done in Ukraine.

Gates, 46, Manafort's long-time business party, pleaded guilty to conspiracy in February and is cooperating with the government in exchange for a more lenient prison sentence.

He was testifying for the second day before a packed courtroom at Manafort's trial on tax and bank fraud charges in Alexandria, Virginia.

Manafort, 69, is the first defendant to go to court to fight charges stemming from Special Counsel Robert Mueller's investigation into Russian interference in the 2016 presidential election.

But the veteran Republican operative is not on trial for anything he did while serving for three months as the chairman of Trump's presidential campaign.

Instead, Manafort is answering to alleged crimes related to money he made providing political consulting services to the former Russian-backed government of Ukraine.

Trump's name has not come up in the court proceedings although Gates did say Tuesday that Manafort had gone to work for a "presidential campaign" in 2016 and that he had joined him.

Trump's name was not specifically mentioned.

- Foreign bank accounts -

At the prodding of prosecutor Greg Andres, Gates walked the six-man, six-woman jury through the foreign bank accounts used by Manafort to conceal payments made by Ukrainian politicians.

Gates explained how the Ukranians deposited millions of dollars and Euros into more than a dozen accounts in Cyprus which were not reported to the Internal Revenue Service.

"He always had control over the accounts," Gates said, referring to Manafort.

At Manafort's direction, the income was not reported to his bookeepers or accountants, he added.

Gates also told the court that Manafort would frequently pay for clothing, landscaping and other personal expenses using wire transfers directly from the accounts in Cyprus and others in St. Vincent and the Grenadines.

Gates also acknowledged making "unauthorized payments" to himself from the Grenadines accounts.

On Monday, he said the payments -- which he billed as personal expenses -- amounted to hundreds of thousands of dollars.

Gates also said that when their work in Ukraine dried up in 2015 Manafort had difficulty paying his bills and had no other clients at that time.

- Income as loans -

He also said Manafort had asked him to disguise income as loans.

"The idea of exchanging income for loans reduced his overall tax liability," he said.

Like he did on Monday, Gates addressed his attention to prosecutors and the judge and studiously avoided the gaze of his longtime business partner Manafort at the defense table.

Gates is expected to be cross-examined by defense attorneys later Tuesday who will attempt to chip away at his credibility.

Manafort, who helped Republicans Gerald Ford and Ronald Reagan reach the White House, was Trump's campaign chairman from May to August 2016, when he was forced to step down amid questions about his lobbying work for Ukraine's former pro-Russian leader Viktor Yanukovych.

Gates worked for Manafort from 2006 to 2016 and was the deputy chairman of Trump's presidential election campaign team under Manafort.

Mueller, a former FBI director, has indicted more than 30 people -- including 26 Russians -- in connection with his probe into whether members of Trump's campaign colluded with Russia to help get the real estate tycoon elected.

Trump has denounced the probe as a politically motivated "witch hunt" and denied there was any collusion with Moscow to defeat Democratic presidential nominee Hillary Clinton.

While Gates and others have pleaded guilty, Manafort has refused to strike a deal.

Legal experts say Manafort may be holding out hopes of a pardon from Trump.

Manafort is scheduled to go on trial in September on separate charges brought by Mueller of conspiracy, money laundering and failing to register as an agent of a foreign government.