ALEXANDRIA, Va. -- Rick Gates admitted in federal court Monday that he committed a host of crimes with his former boss, President Donald Trump's ex-campaign manager, and confessed to stealing from him and others.
In his first hour on the witness stand, Gates cataloged years of crimes, saying most of his wrongdoing was committed on behalf of his former boss, Paul Manafort, while other crimes were for his own benefit, including the theft of hundreds thousands of dollars. Gates also made clear he was testifying against Manafort in the hopes of receiving a lesser prison sentence, having pleaded guilty in February as part of a deal with special counsel Robert Mueller.
Gates has been regarded as a crucial witness for the government ever since he agreed to cooperate in Mueller's investigation into possible ties between Russia and the Trump campaign. The outcome of the trial, now in its second week, could hinge on whether the jury believes the testimony from Gates, 46, who has pleaded guilty to conspiracy to commit fraud and lying to federal authorities and faces a prison term of up to six years.
Wearing a blue suit and gold tie, Gates strode to the witness stand in Alexandria, Va., federal court shortly after 4 p.m., and did not waste much time before cutting to the heart of the issue.
"Did you commit crimes with Mr. Manafort?" prosecutor Greg Andres asked Gates.
"Yes," Gates responded.
As he answered questions, Gates kept his eyes on the prosecutor. Manafort, seated at the defense table, stared intently at his former business partner.
Presented with a copy of the plea agreement he signed, Gates said he conspired with Manafort to falsify Manafort's tax returns.
Andres asked Gates whether he understood that his lies and omissions were illegal.
"Yes," Gates said.
When asked why he had lied, Gates said he had done so at Manafort's request.
Gates said he and Manafort had 15 foreign accounts they did not report to the federal government, and they knew it was illegal.
"Mr. Manafort directed me" to not report those accounts, Gates testified.
Gates also said Manafort had directed him to report money wired from his foreign bank accounts as loans, rather than as income, to reduce Manafort's taxable income. By reporting it as a loan, Gates explained, Manafort could defer the amount of taxes he owed.
"We didn't report the income or the foreign bank accounts," Gates told jurors, noting that he knew he and Manafort were committing crimes each time.
Gates said that even while he was committing crimes with his boss, he was also stealing from him.
He testified that he had control over some of the Cyprus bank accounts that held Manafort's money, and created phony bills to siphon off hundreds of thousands of dollars.
"I added money to expense reports and created expense reports" that were not accurate, he said, to pad his salary by "several hundred thousand" dollars.
That testimony likely explains one of the minor mysteries of the first week of the Manafort trial.
As employees of various stores and service providers testified last week about Manafort's spending millions of dollars on suits, home entertainment systems, and cars, some of the witnesses were shown phony invoices from those firms. It now appears those phony invoices may have been part of Gates' scheme to embezzle money from his boss.
Gates testified that he had embezzled from other employers as well and that he volunteered that information to investigators once he began cooperating.
Gates said he also told prosecutors he had lied in a deposition in a civil case against Manafort involving a private equity fund.
Repeatedly, Gates insisted that most of his crimes were committed at Manafort's explicit instruction. At one point, he rattled off the names of a dozen overseas companies he said Manafort controlled; on prompting from prosecutors he identified three more.
Asked whether the money in the accounts was income to Manafort, Gates said, "it was." The money in them "came from income from political consulting in Ukraine," he said.
Prosecutors did not finish their questioning of Gates on Monday, and he is scheduled to return to the witness stand today.
Manafort and Gates were indicted together last year on dozens of charges that they conspired together to hide millions of dollars from the IRS in foreign bank accounts, and when their cash flow dried up, submitted false information to banks to get loans.
In February, Gates decided to plead guilty to lying to the FBI and conspiring against the United States, as part of a deal struck with prosecutors to provide evidence against his longtime business partner.
Gates admitted to lying to the FBI that month even as he was trying to strike a plea deal with prosecutors, and to conspiring against the United States. In Gates' testimony, the six-man, six-woman jury will have to decide whether they believe an admitted liar when he says many of his lies were ordered by his boss.
Gates' testimony also underscores the trial's stakes for the White House.
Manafort was Trump's campaign chairman, but resigned from the campaign in August 2016 after just five months. Gates, the deputy chairman, remained on the campaign as a liaison to the Republican National Committee through the election. Gates was named deputy chairman of Trump's inaugural campaign, raising huge sums for the event.
DEFENSE TO BLAME GATES
The jury began hearing evidence in the Manafort case last week, starting with the details of Manafort's seven-figure lifestyle. They also heard testimony from Manafort's former accountant and bookkeeper about how Manafort, with help from Gates, repeatedly denied having foreign accounts to report to the IRS, sought to reclassify payments as loans so he didn't have to pay taxes on the payments, and altered information in loan applications.
Manafort's defense strategy has been to argue that he may have made mistakes in his taxes, but he did not lie, and the real criminal in the case is Gates.
On Friday, a tax preparer named Cindy Laporta admitted that she helped disguise $900,000 in foreign income as a loan in order to reduce Manafort's tax burden. Laporta, who testified under an immunity deal with the government, acknowledged that she agreed under pressure from Gates to alter a tax document for one of Manafort's businesses.
Under cross-examination Monday, defense attorney Kevin Downing pressed Laporta on the complexities of Manafort's finances as he worked to paint a picture of a political consultant who left the details to professionals and, in particular, to Gates.
Downing also accused Gates of embezzling "millions," a higher amount than Gates later admitted to in his testimony.
Laporta said she had grown to distrust the information Gates was providing her, though she didn't know about the embezzlement.
But she said she believed Manafort was directing Gates' efforts to disguise loans and conceal income, noting that Manafort was copied on her email traffic with Gates.
"In most instances, it was clear that Mr. Manafort knew what was going on," she said.
Gates, who also served in a senior role in Trump's presidential campaign, is expected to face aggressive cross-examination once prosecutors are finished questioning him.
TRIAL OVER TAXES
The trial over Manafort's taxes and loans is expected to last another two weeks, but the judge has been pressing prosecutors to move quickly through their witnesses and it could end sooner than that.
U.S. District Judge T.S. Ellis III, who repeatedly interrupted prosecutors last week as they tried to present evidence about Manafort's lavish life, clashed again with prosecutor Greg Andres on Monday when Andres delved into the status and identities of the Eastern Europeans who made payments to Manafort.
Andres elicited testimony from Gates and Laporta that tied Manafort more closely to Russia. Laporta testified that in 2006, Manafort received a $10 million loan from Oleg Deripaska, a Russian oligarch close to President Vladimir Putin of Russia. She said she saw no evidence it was ever repaid.
And Gates testified that Konstantin Kilimnik, a Russian citizen who prosecutors claim is tied to Russian intelligence, had signatory authority over some of Manafort's hidden accounts in Cyprus.
Ellis said all that's relevant is that Manafort was paid and whether he hid the income from the IRS.
"It doesn't matter whether these are good people, bad people, oligarchs, Mafia. ... You don't need to throw mud at these people," Ellis said.
Andres said he was entitled to show the jury why Manafort was getting tens of millions of dollars in payments.
"When we try to describe the work, Your Honor stops us and tell us to move on," he said.
The tensions between the judge and the prosecution team boiled over again late Monday as prosecutors attempted to introduce Gates' passport as evidence of his travels to Ukraine and Cyprus. Ellis interrupted them.
"Let's get to the heart of the matter," he scowled.
"Judge, we've been at the heart..." Andres interrupted.
Separately, Manafort faces a second trial in the District of Columbia in September, on charges that he failed to register as a lobbyist for a foreign government, and conspired to tamper with a witness in the case.
Information for this article was contributed by Rachel Weiner, Matt Zapotosky, Ann E. Marimow, Devlin Barrett and Justin Jouvenal of The Washington Post; by Chad Day, Matthew Barakat, Eric Tucker and Stephen Braun of The Associated Press; and by Sharon LaFraniere, Emily Cochrane and Kenneth P. Vogel of The New York Times.
A Section on 08/07/2018