Rick Gates’ testimony in the trial of his former business associate Paul Manafort brought revelations of embezzlement and an extramarital affair, and the admission that he and Manafort committed crimes that included misleading banks to secure loans, omitting the existence of foreign bank accounts to the Internal Revenue Service, and hiding millions of dollars in offshore accounts.
Gates, considered to be the star witness for the prosecution, testified before the 12-member jury across three days, during which he explained how Manafort created entities in Cyprus and opened foreign bank accounts to conceal millions he made from political consulting work in Ukraine.
He also told the court that he — and Manafort on one occasion — falsified documents that were submitted to banks in an effort to secure loans after Manafort’s Ukraine income dried up.
Gates’ testimony was designed to provide details that prove what prosecutors say was a tax scheme that Manafort used to hide income he made in Ukraine from the tax authorities. The government says Manafort made more than $60 million for that work, which was done for Ukrainian President Viktor Yanukovych and the Party of Regions.
But Manafort’s lawyers don’t believe Gates should be trusted, as he admitted to lying to the FBI and stealing money from Manafort. Defense attorneys also say Gates had a “secret life,” a reference to an extramarital affair he had roughly 10 years ago.
On his last day of testimony Wednesday, Gates told the court that he told his wife and Manafort about the affair, which lasted approximately five months. Manafort, he said, was supportive of him.
But Kevin Downing, a lawyer for Manafort, suggested that Gates had four more extramarital affairs from 2010 to 2014, which he did not disclose to the Office of Special Counsel. Federal prosecutors objected to Downing’s question about the additional affairs, and it was not pressed further after lawyers for both parties met with U.S. District Judge T.S. Ellis III.
Gates’ testimony has been the most extensive and highly-anticipated so far in the Manafort trial, which relates to charges brought by special counsel Robert Mueller, who is investigating possible collusion with Russia in the 2016 election.
On Monday, Gates revealed that he stole “several hundred thousand” dollars from Manafort by filing inflated expense reports to him. The money for the reimbursements, he said, came from Ukrainian businessmen who funded Manafort’s political consulting work for his clients in Ukraine.
While Manafort was unaware of Gates’ embezzlement, Gates told the court he informed the government of his actions.
He also admitted that it’s “possible” he submitted personal expenses to President Trump’s inaugural committee for reimbursement. Gates served as the deputy chairman of the inaugural committee.
Gates has been painted by several witnesses as Manafort’s “right-hand” man, someone who Manafort’s tax preparers and bookkeepers went to when they couldn’t reach Manafort.
As a result, Gates was said to have had a close-up look at Manafort’s financial dealings overseas.
On Tuesday, Gates told the court that he would help to prepare consultancy agreements between offshore entities Manafort controlled and shell companies created by Ukrainian billionaires for the purpose of facilitating payments between the two.
The entities Manafort controlled received payments from the Ukrainian oligarchs that funded Manafort’s political and policy work, and some of those payments were made in euros while others were made in U.S. dollars.
Gates said the entities, created in Cyprus, did not sell any products or have employees.
Manafort hired a law firm to officially create the entities, which were unknown to his bookkeeper or tax preparers, which were used to conceal the income he made from his work in Ukraine.
Gates reiterated Wednesday he “made many mistakes over many years.”
Gates completed his testimony around 11 a.m. Wednesday. Prosecutors plan to call as their next witness Morgan Magionos of the FBI.
Gates was indicted with Manafort, but pleaded guilty in February. He accepted a plea deal, the terms of which say he must tell the truth during his testimony in Manafort’s trial. If he does not, the government reserves the right to effectively void the agreement.
Over the course of his appearance in court, Gates admitted he assisted with filing false returns to the IRS that underreported Manafort’s income, and said millions of dollars was concealed in offshore bank accounts. The existence of those accounts was not reported to the tax agency, as required by law.
It was Manafort, Gates said, who told him not to report 15 foreign bank accounts to the government, though they knew such an omission was illegal. He also said Manafort told him to make transfers from the offshore bank accounts and directed whether income that flowed through his overseas accounts should be treated as income or a loan.
Classifying that money as a loan would lessen the amount of income taxes Manafort had to pay.
On one occasion, Gates said, Manafort altered the income to his consulting firm, Davis Manafort Partners International, on a 2016 financial statement submitted to a bank from which he was seeking a loan.
Gates said Manafort changed the statement from his bookkeeping firm to show Davis Manafort Partners International had a net income of $3 million. The original document showed a net loss of more than $630,000.
While Gates admitted to committing criminal acts with Manafort, he also acknowledged wrongdoing of his own.
He told the court he inflated his income on mortgage and credit card applications, created a letter for a colleague that included inaccurate information, and lied during a deposition after Manafort told him “not to include” certain things.
He also altered documents given to banks in an effort to help Manafort obtain loans, though Gates told the court he did not benefit from the loans that Manafort received.
Manafort’s lawyers have sought to use Gates’ admissions to undermine his credibility.
“After all the lies you’ve told and all the fraud you’ve committed, you expect the jury to believe you?” Downing asked Gates on Tuesday.
Gates said he had “accepted responsibility” for his actions and is “trying to change.”
“Mr. Manafort had the same path,” he continued. “I’m here.”
