Gates admits to affair, says Manafort approved shifting money through offshore accounts

Paul Manafort's longtime deputy Rick Gates admitted in court Tuesday to having an extramarital affair a deca...

Posted: Aug 8, 2018 9:47 AM
Updated: Aug 8, 2018 9:47 AM

Paul Manafort's longtime deputy Rick Gates admitted in court Tuesday to having an extramarital affair a decade ago, and he acknowledged under repeated questioning from Manafort's attorneys that he had embezzled money from his former boss.

"I made a mistake," Gates testified in his second day on the stand in Manafort's trial. "I regret it, clearly, and I'm taking responsibility for it."

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But dubbing it the "secret life of Rick Gates," Manafort's attorney Kevin Downing grilled Gates about the lies he had told and the money he had stolen as part of a strategy to undermine his credibility with the jury and suggest Gates was responsible for the crimes Manafort is accused of.

"This jury is supposed to believe you? After all the lies you've told?" Downing said.

Gates replied that yes, he should be believed over Manafort, the former chairman of Donald Trump's presidential campaign.

"I'm here to tell the truth. ... Mr. Manafort had the same path. I'm here," Gates said, looking directly at the jury as he made his appeal. "I have taken responsibility. ... I am trying to change."

The cross-examination came after Gates testified that Manafort sought to move money through offshore accounts and that Manafort had recommended a banker who had loaned him money for a position in the Trump administration.

Manafort is charged with 18 counts of tax and banking crimes, and has pleaded not guilty to all charges. Gates, Manafort's former business partner, pleaded guilty in February and agreed to cooperate with special counsel Robert Mueller's team.

The trial itself is not about the work Manafort did on the Trump campaign. But Gates' testimony pits two former senior Trump campaign aides against each other. After Manafort left the campaign in August 2016 amid swirling questions about his Ukraine work, Gates stayed on the campaign and later helped found a pro-Trump advocacy group, before he was ultimately forced out, too, as questions mounted about Manafort.

'It was an embezzlement from Mr. Manafort'

Manafort's defense attorney dug into Gates about how he had embezzled from Manafort, accusing him of using an offshore bank account that's part of Manafort's alleged crime.

Downing peppered Gates with questions: Was Gates' wife aware of the account he used to siphon money from Manafort? Yes, Gates said. Was she aware of his "secret life"?

"She was," Gates said.

Downing continued to highlight to the jury, and to Gates, how Gates had embezzled from Manafort, though he initially resisted the term.

"Why won't you say embezzlement?" Downing asked.

"What difference does it make?" Gates said, repeated his phrasing that he had submitted "unauthorized" expense reports to Manafort's company.

"Why won't you say embezzlement?" Downing asked a second time.

"It was an embezzlement from Mr. Manafort," Gates finally said.

The intense exchange, where Gates still refrained from showing much emotion, came after the defense lawyer reviewed almost $200,000 Gates had transferred to his own bank account, listed under the holding company Bade LLC, from one of Manafort's shell companies, Global Endeavor.

Gates admitted at this point during the testimony that "it was Mr. Manafort's money."

"Were these payments for your secret life?" Downing asked.

"The answer is no, they're not," Gates said.

'WTF' emails

Earlier Tuesday, prosecutors walked jurors through an email Manafort had sent Gates two weeks after Trump was elected, in which Trump recommended Stephen Calk as Army secretary. Calk is a banker whose bank allegedly loaned Manafort money on false pretenses, prosecutors say.

"We need to discuss Steve Calk for Sec of Army," Manafort wrote to Gates on Nov. 24, 2016. He signed the email as "P."

In his second day of testimony, Gates detailed their use of foreign accounts as well as Manafort's financial troubles.

Prosecutors showed jurors an April 2015 email exchange between Manafort and Gates discussing higher-than-anticipated taxes, which Gates said succinctly summarized the frustration felt by Manafort.

"WTF," Manafort wrote. "How could I be blindsided like this. You told me you were on top of this. We need to discuss options. This is a disaster."

Moving the accounts

Gates told jurors Tuesday that the "typical practice was Mr. Manafort would send me a list of wire requests." Manafort would also send the wire transfer requests to their Cyprus-based law firm, Gates said.

Prosecutors showed emails between Manafort and Gates that appear to confirm Gates' story that Manafort sought to move money that his consulting company had earned from Ukraine through Cypriot accounts.

"There were hundreds of these," Gates testified.

Gates had written to Manafort about transferring money from one of Manafort's shell companies, Leviathan Advisors Limited, to their aboveboard consulting group, DMP International. "Unless you approve otherwise," Gates ended his note proposing the transfer.

"This works. Proceed as you lay it out below," Manafort wrote back, signing his email with the letter "P."

The subject line of the email was "Payments."

At some point during the European banking crisis, Manafort's law firm in Cyprus that oversaw the legal process of setting up the accounts moved them to the country St. Vincent and the Grenadines in the Caribbean. Around that time, Manafort asked for his name to be removed from the bank account registrations, Gates said. Gates said his name was taken off some but not all legal documents in the foreign country.

Gates said Manafort especially wanted to avoid having his name listed in any documents linked to the accounts because he was embroiled in a lawsuit with someone in Ukraine.

Gates testifies on Manafort's money troubles

Gates described the financial issues that Manafort and his various entities began to experience in 2015 and 2016, describing how vendors would reach out to him and Manafort because "loans had not been paid."

By late 2015, Manafort's consulting group DMP had no clients, according to Gates. He said they were attempting to secure another political consulting contract in Ukraine but had not been able to.

Gates said that during this time he also supplied false information to banks in order to help Manafort secure bank loans. He admitted to altering the profit and loss documents, which he said was per Manafort's direction.

Gates explained how he was hired to work on the Trump campaign, although he did not name Trump. Gates said he was paid for the campaign work through savings and investments from Manafort, though he had additional outside income.

In January 2016 Manafort asked Gates to refinance a property in New York on Howard Street -- a property that Manafort never lived in because he stayed at his Fifth Avenue apartment when he was in the city, but still claimed to use as a second home in order to secure maximum benefits for the mortgage refinance loan, Gates said.

A second email

Another email prosecutors showed and Gates confirmed came in 2015, from the Russian Konstantin Kilimnik to Gates discussing money a Ukrainian client had not yet paid Manafort's firm through the accounts.

At the time, Manafort was dry on cash and beginning to panic, prosecutors say. They have alleged that around this time he was using the hollow foreign accounts to help him reduce the taxes he paid to the US government and defraud at least one bank into giving him a loan.

"This is to calm Paul down," Kilimnik wrote to Gates. "I think the wire will go next week realistically." Gates told the court that "Mr. Manafort was quite upset money had not been sent," and Kilimnik wanted to show the boss they were making the effort.

That contract for 1 million euros, with Ukrainian Sergei Lyovochkin and executed between shell companies both sides used, was never paid in full.

Gates started his testimony Tuesday by getting into the gritty details of how much money each Ukrainian billionaire contracted Manafort for, showcasing exactly how much money was flowing into the hidden Cypriot accounts in 2011 and 2012. It amounted to at least 5 million euros, Gates said.

Working for Manafort, Kilimnik would collect the agreements and execute them, Gates said.

Manafort reported some of the payments to tax authorities in the US as loans -- though they were income, Gates said. He was "trying to decrease his taxable income," Gates said.

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