Federal prosecutors Thursday shifted to the heart of their bank and tax fraud case against Paul Manafort, as the 12-member jury heard from his bookkeeper who described how Manafort’s firm started to run out of money around 2016 and, with his former business associate, inflated the income of his consulting business in an effort to secure bank loans.
Heather Washkuhn, managing director at Nigro Karlin Segal Feldstein & Bolno, who listed Manafort as a client for nearly eight years, detailed how Manafort’s consulting firm, Davis Manafort Partners, was flush with cash, but told the court that income began to tank in 2015. That year, the firm reported income of $338,542, and in 2016, it reported a loss of nearly $1.2 million.
Federal prosecutors argue the change was attributed to Manafort’s loss of Ukrainian President Viktor Yanukovych as a client. They say Manafort made $60 million for his work in Ukraine, but concealed millions in foreign accounts to evade taxes.
Washkuhn had an intimate view of Manafort’s finances while he was a client, overseeing his business and personal expenses, multiple properties up and down the East Coast, and income.
Manafort, she said, was “very detail-oriented” and “knowledgeable.”
“He approved every penny of everything we paid,” Washkuhn said.
During the first two days of the trial, prosecutors provided the jury with a look at Manafort’s lavish lifestyle. Some of the goods he purchased, such as his custom suits, and home improvement services were paid for by wire transfers from foreign bank accounts, witnesses said.
But while Washkuhn had access to Manafort’s financial information, she told the court she was unaware he had any foreign bank accounts and did not know of multiple overseas firms Manafort controlled that loaned money to or paid him.
While Manafort lived a life of luxury, emails from Washkuhn painted a behind-the-scenes picture of someone struggling to pay his bills once income to Manafort’s firm plummeted.
In January 2016, according to testimony, Washkuhn told Manafort in an email more than $1 million was needed to pay a host of his expenses. She sent several follow-up messages, including one that said $120,000 was “urgently needed” to pay for his personal bills.
Manafort’s bills for his business also appeared to become an issue. In an email to Rick Gates, Manafort’s right-hand man and business associate, in 2016 entered as evidence by the prosecution, Washkuhn included a list of bills totaling $331,468 that were pending.
She also warned Gates, according to her testimony, that the firm’s medical insurance was at risk of lapsing and said in an email it was “very important to pay ASAP.”
Prosecutors said Thursday that Washkuhn would testify not only to the specifics of Manafort’s finances, but also to the allegations of bank fraud against Manafort. The government argues Manafort misled banks to secure loans after the spigot of funds from his Ukraine work ran dry.
Manafort has pleaded not guilty.
Washkuhn explained to the jury that several documents sent to banks that appeared to be financial statements did not actually come from her firm.
In one instance, Manafort sent to Federal Savings Bank a financial statement for Davis Manafort Partners from 2016 that purported to show the company made $3 million through September 2016.
But Washkuhn said the document had several spelling errors and differed from the form prepared by her bookkeeping firm.
A financial statement from the bookkeeping company for Manafort’s consulting firm as of the end of November 2016, meanwhile, showed the company had a loss of more than $1 million.
In another instance, Gates emailed Washkuhn on the morning of March 16, 2016, asking for a copy of Davis Manafort Partners’ 2015 financial statement to be sent as a Microsoft Word document, which can be edited, rather than a scanned PDF.
The financial statement, according to Gates’ email, was to be sent to the Banc of California.
Washkuhn told Gates she could only send the scanned document, which, emails show, frustrated him.
Gates then told Washkuhn to add $2.6 million of “accrued revenue” to Davis Manafort Partners’ 2015 financial statement. She said it could not be done.
The document submitted by the prosecution shows the statement Gates sent to the Banc of California. Washkuhn said it differed from the statement from her bookkeeping firm.
The font, spacing, and figures were different, she said, and her company’s disclaimer was missing from the document Gates emailed to the Banc of California.
The record submitted also indicated Davis Manafort Partners made $4.5 million, when Washkuhn said it had really brought in $400,000.
It was “four million more than what was reported on the documents that we created.”
Manafort’s lawyers have attempted to pin the blame for the tax and bank fraud charges on Gates, the government’s star witness. The defense argues he lied to and manipulated Manafort to enrich himself.
Washkuhn said that she sometimes communicated with Gates about Davis Manafort Partners’ finances and admitted he “handled a lot of the business affairs.”
But she said that Manafort approved “every expenditure,” both personal and business.
The jury can expect to hear in the coming days from Gates, who pleaded guilty to making false statements and is said to be cooperating with the special counsel’s investigation.
Prosecutor Greg Andres said the government has “every intention” of calling Gates as a witness.
Prior of Washkuhn’s testimony, the jury learned more about Manafort’s spending, hearing from the owner of a landscaping company who worked on Manafort’s house in Bridgehampton, New York, and an executive at Big Picture Solutions in Jupiter, Fla., which provided network services for several of Manafort’s properties.
Joel Maxwell from Big Picture Solutions told the jury Manafort was among his “top 5” clients and paid more than $2 million for its services from 2011 to 2014.
Manafort frequently paid by wire transfers from foreign bank accounts located in Cyprus, he said.
The focus by the prosecution on Manafort’s lifestyle has irked Judge T.S. Ellis III, who is presiding over the case.
“All the evidence of the fancy suits really is irrelevant and besmirches the defendant,” he said Thursday, referencing testimony and evidence related to the suits Manafort purchased. “Most of us don’t have fancy suits or pagodas. It engenders some resentment against rich people.”
Jurors will reconvene for the fourth day of Manafort’s trial at 9:30 a.m. Friday.
