ALEXANDRIA, Va. — The 12-member jury who will decide former Trump campaign chairman Paul Manafort’s future were given an intimate look this week at his seven-figure lifestyle and financial records, which the government says when taken together, provide evidence he was hiding millions of dollars of income from tax authorities.
Manafort is on trial for charges of bank and tax fraud, and his is the first stemming from special counsel Robert Mueller’s investigation into Russian meddling in the 2016 election.
The trial is the first test for Mueller and his team of prosecutors, and the media trucks outside and bevy of reporters packing the rows of a courtroom inside the federal courthouse in Alexandria, Va., demonstrate the attention put on the case.
Federal prosecutors say Manafort made $60 million through political consulting for Ukrainian President Viktor Yanukovych and the Party of Regions and concealed millions of dollars he made from that work in an effort to evade taxes.
When Manafort’s work in Ukraine ended and his income dried up, the government says he lied to banks in an effort to secure loans to continue funding his lavish lifestyle.
Manafort’s trial was initially expected to span up to three weeks. But U.S. District Judge T.S. Ellis III has not hidden the fact that he hopes to conclude sooner, as he frequently prods prosecutors to move things along and has questioned requests to enter certain pieces of evidence into the record.
His push for Mueller’s and Manafort’s lawyers to move at a quick pace has thus far proven to be successful: Prosecutor Greg Andres told the court he anticipates the government will rest its case next week.
Jury selection kicked off Tuesday, with a panel of 12 — six men and six women — ultimately selected, along with four alternates.
Once the jurors were selected, the trial kicked into high gear, as they heard opening statements and from the government’s first witness by the end of the first day.
Assistant U.S. Attorney Uzo Asonye of the U.S. Attorney’s Office for the Eastern District of Virginia painted Manafort to the jury as a man who resorted to lying in an effort to fund a lifestyle replete with luxury cars, multiple houses, and high-end clothes.
Manafort, Asonye said during his opening statement, was someone who “believed the law did not apply to him — not the tax laws, not the banking laws.”
Asonye described Manafort as a man who “got whatever he wanted,” and spent millions of dollars on luxury goods, including a $21,000 watch and $15,000 coat made from an ostrich.
But while Asonye focused his opening statement solely on Manafort’s transgressions, Thomas Zehnle, Manafort’s lawyer, framed the case as one about “taxes and trust.”
He specifically focused on Rick Gates, Manafort’s right-hand man, who is expected to be the star witness for the prosecution.
But Zehnle told the jury that Gates was not someone worthy of their trust, and suggested that Gates manipulated Manafort to enrich himself.
He “violated one of life’s most basic rules,” Zehnle said, “when you’re in the hole, stop digging.”
Gates’ involvement with Manafort and his political consulting firm, Davis Manafort Partners International, has come up at various points throughout the trial.
It’s unclear when exactly he will testify, but Asonye shocked the courtroom Wednesday when he suggested Gates “may not” appear in court.
That was walked back Thursday by Andres, who said the government had “every intention” of calling Gates to the stand.
The government’s first two witnesses in Manafort’s trial were Tad Devine, a Democratic political consultant, and Daniel Rabin, who was hired by Manafort to make television advertisements for Yanukovych’s presidential campaign.
Devine and Rabin both detailed the extent of their work with Manafort for Ukraine, and described him as a savvy political operative who was a driving force behind Yanukovych’s victory.
On Wednesday morning, FBI special agent Matthew Mikuska, an 11-year veteran of the bureau, described the details of the early-morning search in August 2017 of Manafort’s Alexandria, Va., condominium.
Mikuska recalled how an agent knocked three times on Manafort’s door and ultimately used a key to get inside after they received no answer.
The agents had a warrant to search the home, which Mikuska described as a “luxury” apartment spanning more than 2,000 square feet.
Once inside, the government seized a trove of documents, including loan agreements, loan applications, and invoices related to Manafort’s expenses and work for properties he owns up and down the East Coast.
On Wednesday afternoon, the jury heard from six witnesses who all listed Manafort as a client.
Each provided the jury with an intimate look at the millions of dollars Manafort spent to fund his lifestyle.
Maximillian Katzman, the former manager of Alan Couture in New York and son of its owner, described Manafort as one of the store’s “top clients.”
From 2010 to 2014, Manafort spent $929,000 on clothing at the store. Katzman said he received payments from Manafort by wire transfers from foreign bank accounts located in Cyprus and identified Manafort as the only one of Alan Couture’s 40 clients to pay through international wire transfers.
Manafort also shopped at the House of Bijan in Beverly Hills, which has been called the “most expensive” in the world. Ronald Wall, the store’s chief financial officer, said Manafort’s expenses there totaled more than $300,000 from 2010 to 2012, with payments for his purchases made via wire transfers from banks in Cyprus.
Manafort spent more than $3 million on improvements to several properties he owns in New York, Stephen Jacobson, owner of SP&C Home Improvement, told the court.
Jacobson, too, said Manafort paid by international wire transfers from banks in Cyprus.
Among the last vendors who listed Manafort as a client was Joel Maxwell, an executive at Big Picture Solutions in Jupiter, Fla.
Maxwell told the court Manafort was among the company’s “top 5” clients and paid more than $2 million for its services from 2011 to 2014.
He typically paid by wire transfers from overseas bank accounts in Cyprus, Maxwell said.
A theme for several of vendors — including Maxwell, Jacobson, and Katzman — was the existence of what appeared to be forged invoices.
Prosecutors presented each with what purported to be bills from their respective companies to Global Endeavor, a shell company that prosecutors say Manafort created in Saint Vincent and the Grenadines.
The three each individually identified issues with the fake invoices, including spelling errors and incorrect information, and said Global Endeavors was not among their respective clients.
Ellis took umbrage with the government’s focus on Manafort’s lavish lifestyle. He scolded prosecutors on multiple occasions during the trial’s first two days and pushed back on their requests to enter into the record evidence related to Manafort’s purchases.
“Enough is enough,” Ellis said Wednesday. “We don’t convict people because they have a lot of money and throw it around.”
Ellis frequently reminded prosecutors Manafort was not on trial for “having a lavish lifestyle,” and urged them to refocus their efforts on the charges of bank and tax fraud he faces.
By Thursday, though, prosecutors moved closer to the heart of their case against Manafort.
Heather Washkuhn, managing director of Nigro Karlin Segal Feldstein & Bolno, worked as a bookkeeper for Manafort for nearly eight years, and told the court of how the income of his firm, Davis Manafort Partners International, began to crater around 2015.
While the firm reported millions of dollars in income for several years, its income was $338,542 in 2015. In 2016, the firm reported a loss of nearly $1.2 million.
Washkuhn described Manafort as “very detail-oriented” and “knowledgeable.”
“He approved every penny of everything we paid,” she said.
Despite the earlier testimony from vendors who said Manafort frequently paid his bills by wire transfers from foreign bank accounts, Washkuhn said she was unaware he had any bank accounts overseas and did not know of multiple firms in Cyprus prosecutors say he controlled.
Washkuhn also explained how, at the beginning of 2016, it appeared Manafort was struggling to pay his bills. She told him in an email in January 2016 she needed more than $1 million to settle his expenses and sent several follow-up messages regarding funds for his bills.
In one, she told Manafort $120,000 was “urgently needed.”
Bills for Davis Manafort Partners International also became a problem. In an email to Gates, Washkuhn included a list of pending bills that totaled $331,468.
She warned Gates that the firm’s medical insurance was at risk of lapsing and said in an email it was “very important to pay ASAP.”
Washkuhn’s testimony cut to the crux of the government’s bank fraud case against Manafort.
She told the court that several financial statements that were sent to banks pertaining to his consulting firm did not come from her bookkeeping company.
In one instance, Manafort sent to Federal Savings Bank a 2016 financial statement for Davis Manafort Partners that purported to show the company made $3 million through September 2016.
But the document had several spelling errors and differed from the form kept by Washkuhn’s company, she said.
Furthermore, a 2016 financial statement from Washkuhn’s firm for Davis Manafort Partners International as of the end of November 2016 showed the company had a loss of more than $1 million.
Evidence from the government also showed Gates appeared to submit to the Banc of California a financial statement for Davis Manafort Partners International that Washkuhn insinuated was forged.
The financial statement for 2015, she said, used different fonts and spacing, and lacked a disclaimer her company includes on such documents.
Additionally, the record submitted by Gates indicated Manafort’s firm made $4.5 million, when Washkuhn said its income was reported at $400,000.
It was “four million more than what was reported on the documents that we created,” she said.
While Manafort’s lawyers have attempted to place the blame for the records on Gates, Washkuhn told the court it was Manafort who approved “every expenditure.”
The government, meanwhile, pressed its tax fraud case against Manafort on Thursday afternoon and into Friday.
The jury heard from Philip Ayliff, an accountant at Kositzka, Wicks and Company who had Manafort as a client for several years and prepared his business and personal tax returns.
Alyiff told the court that Manafort never told him he had any financial interest in foreign bank accounts, despite being informed the existence of such had to be disclosed on tax filings.
In August 2011, Ayliff emailed Manafort asking whether he, his wife, or their children had authority over any bank accounts overseas. Manafort replied, “No.”
Manafort’s tax returns from 2010 to 2014, which were shown to the jury, indicated he did not have overseas bank accounts.
Jurors were also presented with the specifics of Manafort’s personal income from his tax filings.
In 2010, his income was more than $500,000, and in 2011, more than $3 million. He listed income of $5.3 million in 2012 and $1.9 million in 2013. In 2014, Manafort reported income of $2.9 million.
In addition to Ayliff, jurors heard from Cindy Laporta of Kositzka, Wicks and Company, who took over Manafort’s account after Ayliff retired.
Laporta told the court she reported $900,000 as a loan to Davis Manafort Partners International on tax filings when it was really income.
Laporta recalled a conversation in September 2015 she had with Gates, during which he said Manafort didn’t have the money to pay the taxes he owed. Gates suggested they report a $900,000 loan from Telmar Investments, an entity in Cyprus that prosecutors say Manafort controlled, to decrease the amount Manafort had to pay.
She reported the loan on Manafort’s tax returns for 2014. The $900,000 loan, Laporta said, reduced Manafort’s income for the year by that amount. She estimated he saved between $400,000 and $500,000 on his taxes because of the loan.
Laporta said she didn’t push back on the misrepresentation because she feared it would open her firm up to litigation if she refused to file the tax return. She also didn’t want to call Manafort and Gates “liars” because Manafort was a long-time client.
She said she received a copy of the two-page loan agreement that included Manafort’s signature.
In addition to the fudged loan from Telmar, Laporta also described how Manafort asked her in 2016 about a $1.5 million loan from Peranova Holdings, another Cyprus-based company prosecutors say Manafort controlled, while he sought a loan from Citizens Bank.
Laporta said Gates and Manafort instructed her to tell the bank that the $1.5 million loan was forgiven, which she did. His 2015 tax returns, she said, would reflect the change.
Laporta said she relied on “their word” — referencing Manafort and Gates — with regards to the loan being forgiven, though she did not believe that had actually happened.
Gates provided Laporta with a letter regarding the loan forgiveness, but she told the court it was likely fake.
During her testimony, Laporta also said Manafort asked her to inform a bank that a property he owned in New York City was a second home, when it had actually been used as a rental property that generated rental income. She was also instructed to tell another bank that Manafort would be getting $2.4 million for work he did in Ukraine, though she did not believe that was true.
Laporta was one of five witnesses who received immunity in exchange for her testimony. She told the court she sought protection because she feared prosecution given that she prepared tax returns for Manafort based on information she did not believe was true.
The court adjourned Friday evening and jurors will return Monday afternoon.
