The long awaited showdown between Paul Manafort and Rick Gates came Tuesday in an Alexandria, Virginia, courtroom as the two former Trump campaign advisers each had his credibility savaged in Mr. Manafort’s financial-fraud trial.
In his second day of testimony, Mr. Gates told jurors of the bank and tax documents he fudged so that Mr. Manafort, a former employer, could continue living a lavish lifestyle even after his income began drying up.
But Mr. Gates also confessed to embezzling several hundred-thousand dollars from Mr. Manafort to fund an extramarital affair, and said he also may have charged personal expenses to the Trump campaign as a member of its inauguration committee.
Earlier this year, Mr. Mueller indicted Mr. Gates and Mr. Manafort in Virginia on charges of bank and tax fraud. Mr. Manafort pleaded not guilty, while his former protege accepted a plea deal. Prosecutors agreed to drop the charges against Mr. Gates in exchange for his cooperation and testimony against Mr. Manafort.
Evasive and at times shaky, Mr. Gates appeared to be unsure of his answers, even contradicting himself. It was a different Mr. Gates from the man who earlier in the day confidently answered questions from prosecutor Greg Andres.
While telling the courtroom about how he stole from Mr. Manafort’s company by submitting false expense reports, Mr. Gates refused to say he embezzled from his former boss, even as Manafort defense attorney Kevin Downing kept pressing him to admit it. He eventually conceded his actions were embezzlement.
Mr. Gates faced a blistering two-hour cross examination from Mr. Downing, who assailed his character, repeatedly questioning his truthfulness.
“After all the lines you’ve told and fraud you’ve committed, you expect this jury to believe you?” Mr. Downing asked.
The attacks on Mr. Gates‘ trustworthiness is part of a strategy by Manafort attorneys to blame him for the financial crimes alleged against their client. They contend that Mr. Gates committed the bank and tax fraud in an effort to hide his embezzlement from his boss.
Mr. Downing immediately pounced on Mr. Gates providing the Special Counsel’s Office with “false and misleading information” before reaching a plea agreement. The questioning reflected the defense counsel’s accusation that Mr. Gates has told so many lies, he would have said anything to cut a deal.
After a series of cagey responses in which Mr. Gates blamed the inaccurate information on “instances where he struggled” with his memory, Judge T.S. Ellis III interrupted to ask flat out if he provided false information to prosecutors.
“I provided false information prior to my plea agreement,” Mr. Gates conceded.
During his cross examination, Mr. Gates detailed his crimes and deceit. He admitted to submitting fraudulent expense reports, using money from Mr. Manafort’s businesses to cover the cost of an affair with a lover in London, including paying for her apartment in the British capital.
Mr. Gates admitted he took business trips with Steve Brown, a movie producer who has faced his own accusations of duping investors, to Las Vegas with money stolen out of Mr. Manafort’s Cyprus bank accounts.
In one notable exchange, Mr. Gates said he may have submitted personal expenses to the committee organizing President Trump’s 2017 inauguration committee of which he was a member. Mr. Gates gave a cryptic answer about the inauguration committee reviewing expenses “very closely,” but Mr. Downing persisted.
“Did you submit personal expenses?” Mr. Downing asked again.
“It’s possible,” Mr. Gates replied.
Mr. Gates also admitted to paying himself unauthorized bonuses and submitting false expense reports as part of his embezzlement operation. He told the courtroom that on separate occasions he transferred $65,000 and $125,000 from Manafort-controlled accounts to his personal ones.
“I was, in essence, living beyond my means,” Mr. Gates said as the reason for the his actions.
But Mr. Gates said not only did he steal from Mr. Manafort, but said he helped his former mentor commit tax and financial fraud. He explained to the court how he faked loan and mortgage documents, sometimes coverting PDF files into word documents so they could be easily manipulated.
Millions flowed to Mr. Manafort and his political consulting businesses from Ukrainian politicians who paid him for lobbying and campaign work. But when that party was voted out of power in 2014, Mr. Manafort’s income began drying up and he used fraudulent home mortgage loans to fund his opulent lifestyle, prosecutors have argued.
Mr. Gates testified that Mr. Manafort doctored a 2016 profit statement to obtain a mortgage loan. The original statement showed his firm had lost $638,000 that year, but Mr. Manafort changed it to show a profit of about $3 million, Mr. Gates said.
On another occasion, Mr. Gates told representatives from Citizens Bank there was no mortgage on a Brooklyn townhouse owned by Mr. Manafort. But when the bank got insurance documents for the property, it revealed there was a mortgage. Mr. Gates said he then submitted older insurance documents showing no mortgage on the property.
“Rick, I just saw this. WTF? 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,” Mr. Gates said reading the email sent by Mr. Manafort.
Among the perks he sought for Stephen Calk, an executive at Federal Savings Bank in Chicago, were a position on the campaign’s economic advisory council. After the election, Mr. Manafort even tried to get him in the mix for nomination to be Army secretary, Mr. Gates said. Mr. Manafort also appealed to Mr. Gates for inauguration tickets for Mr. Calk and his son.
In both instances, Mr. Manafort approached Mr. Gates for help. Mr. Gates had followed Mr. Manafort into the Trump campaign and remained behind even after Mr. Manafort departed, working for the campaign and later the presidential transition team.
Judge Ellis and prosecutors from Mr. Mueller’s prosecutorial team continued to clash, according to a transcript released Tuesday. During a discussion away from the jury, Judge Ellis suggested that Mr. Andres was crying.
“I understand how frustrated you are,” Judge Elis said, according to the transcript. “In fact, there’s tears in your eyes right now.”
When Mr. Andrews insisted he didn’t have tears in his eyes, Judge Ellis shot back, “well, they’re watery.”
Prosecutors and Ellis have argued repeatedly about the importance of Mr. Manafort’s political lobbying work and his lavish lifestyle. Judge Ellis has also criticized prosecutors for taking too long with certain witnesses.
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