Paul Manafort's lawyer attacks credibility of Rick Gates

Political consultant Paul Manafort's protege acknowledged writing a fraudulent letter to prospective investors and using business expenses on an extramarital affair as Manafort's trial defence lawyer on Tuesday attacked the credibility of the star witness against the former Trump campaign chairman.

Rick Gates testifies to 'modified' invoices involving payments to Manafort

Rick Gates is shown in a Feb. 14, 2018, photo in Washington. Gates, who has pleaded guilty to a federal crime, testified on Monday that he organized fraudulent paperwork both with and without Paul Manafort's knowledge. (Alex Brandon/Associated Press)

Political consultant Paul Manafort's protege acknowledged writing a fraudulent letter to prospective investors and using business expenses on an extramarital affair as Manafort's trial defence lawyer on Tuesday attacked the credibility of the star witness against the former Trump campaign chairman.

Rick Gates, who is co-operating with special counsel Robert Mueller's investigation into Russian interference in the 2016 U.S. election, testified under questioning by lawyer Kevin Downing that he provided false information to investigators before he pleaded guilty to charges in February.

"Have they confronted you with so many lies that you can't remember?" Downing asked Gates, who also worked on U.S. President Donald Trump's campaign.

Undercutting Gates's credibility is the foundation of Manafort's defence. Manafort, 69, has pleaded not guilty to 18 counts of bank fraud, tax fraud and failing to disclose foreign bank accounts containing tens of millions of dollars earned from work for Russian-backed politicians in Ukraine.

The charges in federal court in Alexandria, Va., largely pre-date the five months Manafort spent on Trump's campaign.

Extramarital affair, fraudulent favour

On Monday and earlier Tuesday, Gates testified that he and Manafort had engaged in numerous improper financial manoeuvres involving their work in Ukraine, but Gates, 46, pinned the majority of the responsibility on Manafort. When it was his turn for questioning, Downing accused Gates of having a "separate, secret life" with his lover in London and of using business expenses to pay for the affair, including an apartment in the British capital.

"There is a period of time over 10 years ago when I had a relationship, yes," Gates said.

Gates is seen in the background in this July 17, 2016 file photo as Manafort, then the Trump campaign chairman, talks to reporters on the floor of the Republican National Convention in Cleveland. (Matt Rourke/Associated Press)

He also acknowledged writing a fraudulent letter to prospective investors in connection with a movie project involving a person by the name of Steve Brown. "You committed fraud with Mr. Brown as a favour?" Downing asked him. Gates replied: "I did. I admit to that."

Manafort's trial is the first on charges brought by Mueller's office. While outside the scope of the trial, Mueller is also investigating whether Trump campaign members co-ordinated with Russian officials, an allegation Trump denies.

Gates pleaded guilty to lying to investigators and conspiring to defraud the United States.

Focus on tax filings

Questioned by prosecutors earlier on Tuesday, Gates testified that Manafort instructed him not to tell their firm's bookkeeper about payments from accounts in Cyprus that held millions of dollars in earnings from consulting work for pro-Russian politicians in Ukraine.

There were hundreds of emails showing Manafort approved payments out of the Cypriot accounts, he said. Gates's testimony was part of the prosecution's effort to prove that Manafort was responsible for financial manoeuvres that he and other witnesses have testified include filing false tax returns and failing to report foreign bank accounts.

One part of his testimony led to some laughter in the courtroom. "Not happy. I just saw this. WTF," Manafort wrote to Gates in an email entered into evidence showing Manafort's reaction when he learned how much money he would have to pay in 2014 taxes. G

Gates said that he helped create documents to convert some income to a loan to lower Manafort's tax bill. "You created a loan agreement for a loan that didn't exist?" prosecutor Greg Andres asked him. "Yes, we did," he replied.

He testified about a complex scheme in which earnings from Manafort's political work in Ukraine would be paid by Ukrainian businessmen using companies in Cyprus to other Cyprus-based companies controlled by Manafort.

Prosecutors showed contracts laying out that Manafort would be paid $4 million US a year in quarterly installments of $1 million, all channelled through Cyprus.

The funds were logged as loans in order to meet later audits in Cyprus that required documentation of transfers between bank accounts, but Gates testified they were in fact compensation to Manafort.

"A lot of these loan agreements are backdated," Gates said. Money from the Ukraine work dried up after pro-Russian President Viktor Yanukovych was forced from power in 2014, Gates testified.

A $1 million payment for work in 2014 was "significantly past due" and "Mr. Manafort was quite upset the money had not been sent," Gates told the court. Manafort's Kiev-based aide Konstantin Kilimnik was able to collect $500,000, Gates said, but "to my knowledge it was never paid in full." Kilimnik was indicted in the Mueller investigation in June.