ALEXANDRIA, Va.— An accountant who worked on Paul Manafort’s tax returns said Manafort informed him he did not have a financial interest in any foreign bank accounts, and the existence of such accounts were not reported on his filings with the Internal Revenue Service.
The testimony came Friday as prosecutors started to address the crux of their tax fraud case against Manafort, President Trump’s former campaign manager, who they say concealed millions of dollars in income overseas.
Philip Ayliff of the Virginia-based KWC told the court that he helped prepare personal and business tax returns for Manafort and his political consulting firm, Davis Manafort Partners International.
DMP International was started in 2011 when Manafort began doing work in Ukraine.
Alyiff testified Friday that for Manafort’s tax returns from 2010 to 2014, he reported having no bank accounts in foreign countries. Whether a filer has such accounts is information requested by the IRS.
Ayliff emailed Manafort in August 2011 regarding his tax return to ask whether he, his wife, or their children had authority over any bank accounts overseas.
Manafort, Ayliff said, replied, “No.”
The specifics of Manafort’s tax returns detailed in court by Ayliff also demonstrated how Manafort saw his income soar once he began working as a political consultant for clients in Ukraine. That changed, however, after 2014, when his one-time client, Ukrainian President Viktor Yanukovych, fled to Russia.
Manafort’s income according to his 2010 tax return showed income of just over $500,000. It skyrocketed the next year to more than $3 million, which is when the work in Ukraine began.
The following year, in 2012, Manafort’s income was listed at $5.3 million on his return, and nearly $2 million in 2013.
His 2014 tax return showed Manafort’s income reported at $2.9 million.
Ayliff questioned Manafort on several occasions about transactions that raised red flags for him, he told the court Friday.
In one email in 2009, Ayliff asked Manafort about a $1 million transaction from Deutsche Bank to LOAV Advisors Limited, and inquired as to whether the source of the money and whether it was taxable income.
He also sought documentation from Manafort and Gates for a $1.5 million loan from the Cyprus-based Peranova Holdings, but did not receive any.
“There normally wasn’t a response,” he told the court.
Prosecutors say Peranova Holdings is a shell company Manafort created in Cyprus and may have been used to hide millions in income. Over the first three days of the trial, the jury has heard that Peranova Holdings was used to pay Manafort’s bills.
Ayliff said he believed Peranova Holdings was a third party, and told the jury it was Gates who instructed him to classify the $1.5 million as a loan.
He further told the court he would’ve wanted to have known if Manafort controlled Peranova Holdings’ bank account, as it would have affected what was reported to the Internal Revenue Service.
Ayliff also told the court he had no knowledge of more than a dozen overseas entities Manafort owned. Many of the companies were listed as clients of Davis Manafort Partners International in the general ledger prepared by a bookkeeping company for Manafort, he said.
Alyiff said he would need to know whether Manafort controlled payments from those entities, because a report would have been required to be submitted to the U. S. Treasury. Alyiff said he had questioned Manafort about several transactions, including where money used to purchase a property in New York City came from and whether the source was a foreign bank account.
Manafort said the funds came from a savings account his wife had.
Prosecutors have showed over the first four days of the trial that Manafort made several payments to U.S. vendors by wire transfers from bank accounts in Cyprus.
In addition to inquiring about Manafort’s tax returns, federal prosecutors also discussed his rental properties with Ayliffe.
Prosecutor Uzo Asonye presented an email Manafort sent to Ayliff in 2015 alerting him to questions UBS had about his property on 5th Avenue in New York City as he sought to secure a mortgage loan. Manafort instructed Ayliff to tell the bank the property was for personal use.
But Ayliff said it was rental property, had always been a rental, and was treated as such with regards to his tax filings.
The government says Manafort made $60 million from work he did in Ukraine and concealed millions overseas to evade taxes.
He faces 18 counts of tax and bank fraud and has pleaded not guilty.
