Paul Manafort’s legal team claims he was a victim of a disgruntled business partner who stole money from his company and then turned against him after cutting a deal with prosecutors, according to their opening statement in his financial fraud trial on Tuesday.
Manafort, Donald Trump’s former campaign chairman who is charged with 18 counts of tax and bank fraud, faced his first day of trial at federal court in Alexandria, Va., on Tuesday. Prosecutors claimed in an opening statement that the former lobbyist intentionally misled the IRS, mortgage lenders, and even his own bookkeeper to evade taxes and obtain millions of dollars in fraudulent loans.
The first day of Manafort’s trial also focused on his alleged efforts to deceive business associates, his use of foreign bank accounts to stash money from his Ukrainian oligarch clients, and his luxury shopping sprees – including a $15,000 ostrich-skin suit.
But Manafort’s attorneys argued that his only mistake was trusting the wrong person – his former business partner Rick Gates, who ran a political consulting firm with Manafort.
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Kevin Downing, attorney of former Trump campaign chairman Paul Manafort, leaves the Albert V. Bryan United States Courthouse today
In the dock: Attorney Tom Zehnle gestures to his client, former Trump campaign manager Paul Manafort, in a court room sketch on the opening day of his trial on bank and tax fraud charges
Assistant U.S. Attorney Uzo Asonye speaks during the opening day of the trial of former Trump campaign manager Paul Manafort, in a courtroom sketch
Gates has already pleaded guilty to conspiracy and lying to the FBI and is the government’s key witness in the case. He is expected to testify later this week.
‘We’re primarily here because of one man, and that man is Rick Gates,’ said Manafort’s attorney Thomas Zehnle.
Zehnle claimed Gates ‘embezzled millions’ from Manafort by paying himself fake bonuses and expenses out of their company’s bank accounts, and ultimately falsified company financial documents to avoid discovery.
‘Rick Gates had his hand in the cookie jar, and he couldn’t let his boss find out,’ claimed Zehnle.
Zehnle argued Gates was trying to pin blame on Manafort because he wanted to avoid jail time and paying back taxes.
Thomas Zehnle (C) and Jay Nanavati (R), attorneys representing Manafort, chat outside the US District Court after the first day of Manafort’s trial in Alexandria, Virginia
Judge T.S. Ellis III is presiding over the trial of Paul Manafort who stood fourth from right among his six-strong defense team as the judge addressed the jury informally
Seats behind Manafort were reserved for his family members, including his wife Kathleen (seen above leaving the court). His daughters Jess, 36, and Andrea, 32, did not attend
Prosecutors countered that Manafort was fully aware he was defrauding the federal government, and intentionally lied and omitted information from his tax and loan documents.
The former Trump campaign manager could face over 100 years in prison on 18 charges related to financial and tax fraud.
Manafort is shown in this booking photo in Alexanderia, Virginia, U.S., July 12, 2018
Manafort’s trial is the first stemming from special counsel Robert Mueller’s investigation into Russian interference in the 2016 election, and is considered a major test for Mueller’s team.
Judge T.S. Ellis has barred the prosecution from making almost any reference to the Trump campaign during the trial, which focuses primarily on Manafort’s foreign earnings while working for former Ukrainian President Viktor Yanukovych.
Federal prosecutors did not reference the Trump campaign or Russian collusion in opening arguments on Tuesday, and they previously said they don’t expect to mention this at the trial.
Between 2010 and 2014, the government said Manafort received $60 million for his consulting work in Ukraine for former President Viktor Yanukovych and his political party, the Party of Regions.
Assistant United States Attorney Uzo Asonye told a jury of six men and six women in Alexandria, Virginia, that Manafort had behaved as if he was above the law as a ‘cash spigot’.
Prosecutors said he spent the money on luxury items and $6 million in real estate, including homes in Manhattan, Brooklyn, Florida, and the Hamptons.
Asonye said Manafort amassed expensive cars and watches and even a $15,000 jacket made from ostrich.
Kathleen Manafort departs from U.S. District Court following the opening day of her husband’s trial
Manafort is fighting the 32 charges against him. He stood in front of federal judge T.S. Ellis III as his trial on tax and bank fraud began in Alexandria, Virginia
Relaxed in court: Manafort sat with his six-strong defense team dressed in a dark suit, white shirt and light tie as he watched the jury selection take place. He smiled towards journalists when he entered the court
The prosecution’s focus on Manafort’s luxury lifetstyle earned a rebuke from Judge T.S. Ellis.
‘It isn’t a crime to have a lot of money and be profligate in your spending,’ said the judge, warning the government to stick to discussing the criminal charges.
‘A man in this courtroom believed the law did not apply to him,’ said U.S. prosecutor Uzo Asonye. ‘Paul Manafort placed himself and his money above the law.’
Asonye said Manafort lied to the IRS about his income, approached multiple banks for loans using false financial information, and failed to disclose 30 bank accounts in three foreign countries where he was stashing payment from his Ukrainian clients.
He said Manafort also used associates, employees and others close to him to help him obtain illegal loans and personally ‘directed their activities.’
The government promised these allegations would be backed up by emails written by Manafort personally, as well as witness testimony.
‘You will read Manafort in his own words authorizing transactions from foreign accounts,’ said Asonye.
Witnesses will include Manafort’s bookkeeper, who prosecutors said was kept in the dark about Manafort’s foreign bank accounts and income.
They will also include Manafort’s former business partner Gates and lenders who Manafort allegedly used to obtain fraudulent loans.
Another former business associate of Manafort, political consultant Tad Devine, testified on Tuesday evening about his work with Manafort in the Ukraine.
Devine said Manafort ran ‘a really incredible operation in Ukraine’ and he was ‘extremely impressed with him and the people around him.’
Family and defenders: Manafort’s wife Kathleen was sitting behind him in the court but his daughters Jess, 36, and Andrea, 32, did not appear to be in attendance
Cash connection: Prosecutors say that Manafort took his earnings from working for Ukraine’s then leader Viktor Yanukovych and spent lavishly, including on a condo a ‘stone’s throw’ from the Alexandria, VA, court
He also authenticated several emails regarding payments that the Party of Regions’ financial backers made to Manafort, including a $100,000 ‘success fee’ for helping Yanukovych win the 2010 election.
Manafort’s attorney Zehnle also dismissed the focus on wealth as a distraction, asking the jury to ‘consider how those expenditures actually prove the case the government’s bringing to court.’
Key to the trial: Rick Gates, Manafort’s former deputy, is a witness for the prosecution who has flipped but who the defense say was pilfering Manafort’s cash for himself
Manafort ‘shouldn’t be here,’ argued Zehnle, who claimed his client ‘didn’t wilfully or intentionally mislead the IRS.’
Zehnle argued it was the Party of Regions, not Manafort, which made the decision to pay the lobbyist through foreign shell companies.
‘Paul Manafort did not come up with this,’ said Zehnle.
Manafort’s side seemed pleased with the first day of arguments. Manafort’s wife, Kathleen, gave Zehnle a warm hug when the court took a brief break after his opening arguments.
There was speculation that Manafort’s trial could last several weeks, but Judge Ellis showed an interest in expediting the process on Tuesday.
A jury was selected on Tuesday morning, which included seven men and nine women. Opening statements were made and the first witness, Tad Devine, was called.
Manafort, 69, who is currently detained at Northern Neck Regional county jail in Virginia, appeared in court wearing a dark suit, white shirt and light colored tie. The former lobbyist and Trump aide looked relaxed and smiled at the packed crowd of journalists when he entered the courtroom with six attorneys.
Seats behind Manafort were reserved for his family members, including his wife Kathleen. His daughters Jess, 36, and Andrea, 32, did not attend.
The jury is drawn from the Virginia suburbs of Washington D.C., which voted overwhelmingly against Trump.
The defense succeeded in having the judge ban prosecutors from mentioning Manafort’s links to Trump, saying it would prejudice jurors against him, and prosecution witnesses have been told not to use the president’s name.
Asonye told the jury that between 2010 and 2014 his political consultancy work in Ukraine for his ‘golden goose’, pro-Russia political candidate turned Ukraine president Yanukovych.
But, Asonye said, he failed to report $15 million of that to the IRS, created sham loans from offshore accounts which he did not pay, and falsified records to borrow from U.S. banks.
‘He created cash out of thin air,’ the prosecutor said – and said that some of the cash was still not accounted for and properly taxed.
‘A man in this courtroom believed the law did not apply to him – not tax law, not banking law.’
Asonye told jurors the evidence would show Manafort hid ‘tens of millions of overseas income’ to avoid paying taxes. Asonye said the evidence would show he lied to the Internal Revenue Service.
Asonye said Manafort set up more than 30 bank accounts in overseas countries and funneled millions of dollars into them in order to bankroll an extravagant lifestyle.
Asonye described how Manafort snapped up expensive real estate in the United States, spent millions of dollars on renovating his properties and more than a half million dollars on ‘fancy clothes.’
The tax and bank fraud trial represents the first test of Mueller’s ability to win a conviction of a former Trump aide. Three other aides, including Manafort’s longtime business partner Gates, have already pleaded guilty and are cooperating with Mueller’s probe.
Prosecutors are seeking to provide details of Manafort’s work for a pro-Russian political party in Ukraine, raising the possibility that new information about his Russian connections could emerge. Manafort has filed a motion to have details of that work excluded from trial.
Also there: The protests centered on Trump and Russia but little or no evidence will be devoted to the topic, with Manafort charged on tax and bank fraud relating to his business in Ukraine
Protests: Demonstrators took advantage of the media spotlight on the political trial of the year – at least so far – by arriving early in Alexandria, VA, to make anti-Trump statements
Prosecutors also accuse him of lying to U.S. banks to obtain real estate loans in a bid to maintain a lavish lifestyle after his client, former pro-Russia Ukrainian President Viktor Yanukovych, fell from power in 2014 and the money stopped.
But Zehnle disputed prosecutors’ account that Manafort was trying to conceal his earnings by storing money in bank accounts in Cyprus. He said that arrangement was not Manafort’s doing but was instead the preferred method of payment of the supporters of the pro-Russia Ukrainian political party who were paying his consulting fees.
Defense lawyers also sought to address head-on Manafort’s wealth and the images of a gaudy lifestyle that jurors are expected to see during the trial.
‘Paul Manafort traveled in circles that most people will never know and he’s gotten handsomely rewarded for it,’ Zehnle said. ‘We do not dispute that.’
Zehnle contended in his opening statement that Manafort trusted others to keep track of the millions of dollars he was earning from his Ukrainian political work.
He made clear that undermining the credibility of Rick Gates, his former business associate and the government’s star witness, is central to the defense strategy. Zehnle said Manafort, earning millions as a political consultant helping officials in other parts of the world, relied on Gates and others – including a professional accounting firm – to keep watch over the money.
‘Money’s coming in fast. It’s a lot, and Paul Manafort trusted that Rick Gates was keeping track of it,’ his attorney Thomas Zehnle said. ‘That’s what Rick Gates was being paid to do.’
He warned jurors that Gates, another former Trump campaign aide, could not be trusted and was the type of witness who would say anything he could to save himself from a lengthy prison sentence and a crippling financial penalty.
Gates, who spent years working for Manafort in Ukraine and is also accused of helping him falsify paperwork used to obtain the bank loans, cut a plea deal with Mueller earlier this year.
Line: Reporters arrived early to get a seat in the federal courthouse in Alexandria, Virginia, for the first Mueller trial
Manafort, 69, faces over 100 years in prison on 18 charges related to financial fraud, including filing false income tax returns, failure to disclose foreign bank accounts and bank fraud.
He is accused of filing false income taxes in 2010, 2011, 2012, 2013 and 2014 and defrauding at least three different lenders who will be named in the course of the trial.
He is also charged with failing to file disclosures with the U.S. government for his accounts at foreign banks.
The former Trump campaign director who is currently detained at Northern Neck Regional county jail in Virginia, appeared in court wearing a dark suit, white shirt and light-colored tie.
The former lobbyist and Trump aide looked relaxed and smiled at the packed crowd of journalists when he entered the courtroom.
He was flanked by six lawyers, including Brian Ketchum, who was speaking for the defense team on Tuesday.
Seats behind Manafort were reserved for his family members, including his wife Kathleen. His daughters Jess, 36, and Andrea, 32, did not appear to be in attendance
Dozens of jurors had packed a federal courtroom Tuesday in Alexandria, Virginia, to face questions from a judge and lawyers about whether they can be fair and impartial.
Judge Ellis, a 78-year-old Ronald Reagan appointee to the federal bench, questioned potential jurors out of earshot at the bench.
The 69-year-old lobbyist appeared slimmer than in previous court appearances.
The 12 jurors and four alternates are set to hear more about Manafort’s lavish lifestyle, which prosecutors say he funded by evading taxes.
Those prosecutors are actively telling witnesses not to mention Trump at all, ABC News reported.
The judge has ruled in favor of a defense motion that highlighting Manafort’s links to Trump would be prejudicial in the northern district of Virginia.
Alexandria, where the jury pool is drawn from, is 70 per cent Democratic.
The judge has already banned the use of the word ‘collusion’ and any mention of ‘Russians’ in the course of the trial.
ABC News said that one witness had been told by Mueller’s team to be careful when he refers to Manafort’s New York condo – which is in Trump Tower – by not mentioning its precise location.
But two questions loom large in the federal courtroom: Will Donald Trump’s former campaign chairman spend what effectively could be the rest of his life in prison?
Or will special counsel Robert Mueller be handed a defeat in his team’s first trial since his appointment more than a year ago?
Those questions came as the president and his lawyer-spokesman, Rudy Giuliani, have intensified their attempts to undermine the Mueller investigation in the court of public opinion and as the president continues to waffle on whether he’ll sit for a private interview with prosecutors.
Federal justice: Manafort will go on trial in front of Judge T.S. Ellis III at the federal courthouse in Alexandria, VA
Flashy lifestyle: Manafort’s spending will be in the spotlight once evidence begins to be heard
Legal team: Defense attorneys Jay Nanavati (left) and Richard Westling (right) arrived ahead of the jury selection hearing
The way it was: Paul Manafort was Trump’s campaign chief during the Republican convention in Cleveland and was seen on stage talking to Ivanka during a sound check before Trump’s speech accepting his party’s nomination
The president criticized Mueller by name over the weekend and continues to refer to the special counsel investigation into Russian election interference as a ‘witch hunt’ and ‘an illegal scam.’
While the main areas of Mueller’s investigation are Russia’s actions during the 2016 presidential election and any attempts by Trump to obstruct justice, none of those topics are expected to come up in Manafort’s trial.
In fact, prosecutors said last week they don’t expect the word ‘Russia’ to be mentioned at all.
Instead, the trial will center on Manafort’s Ukrainian consulting work and only briefly touch on his involvement with the president’s campaign.
Prosecutors have lined up 35 witnesses and more than 500 pieces of evidence they say will show how Manafort earned more than $60 million from his Ukrainian work and then concealed a ‘significant percentage’ of that money from the IRS.
Prosecutors will also argue that Manafort fraudulently obtained millions more in bank loans, including during his time on the campaign.
In particular, prosecutors say they will introduce evidence that a chairman of one of the banks allowed Manafort to file inaccurate loan information in exchange for a role on the Republican campaign and the promise of a job in the Trump administration that never materialized.
At the center of all this will be another Trump campaign aide, Rick Gates, who spent years working for Manafort in Ukraine and is also accused of helping him falsify paperwork used to obtain the bank loans. Gates, who cut a plea deal with Mueller earlier this year, is expected to testify against his former mentor.
Gates is also expected to play a key role in Manafort’s second trial, scheduled for September. That trial, set in the District of Columbia, involves allegations that the longtime political consultant acted as an unregistered foreign agent for Ukrainian interests and made false statements to the U.S. government.
Manafort has pleaded not guilty to those charges, as well.
In the Washington case, a federal judge last month ordered Manafort jailed after Mueller charged him with witness-tampering, charges to which he pleaded not guilty.
A U.S. appeals court in Washington on Tuesday rejected Manafort’s request to be released. A three-judge panel said there was no clear error in the lower court’s decision, noting that Manafort ‘went right past the line with the alleged witness tampering.’
Manafort is the only American charged by Mueller to opt for a trial.
The other 31 people charged have either pleaded guilty or are Russians seen as unlikely to enter an American courtroom. Three Russian companies have also been charged. One of those companies has pleaded not guilty and is fighting the allegations in federal court in Washington.
INSIDE THE PAUL MANAFORT FRAUD TRIAL
On Monday, prosecutors said in court filings that they intend to prove that Manafort earned more than $60 million lobbying for the former pro-Russia Ukrainian government and failed to report ‘a significant percentage’ of that.
His lawyers are seeking to exclude evidence at trial that details Manafort’s political lobbying work in Ukraine, saying it would be ‘irrelevant, prejudicial and unnecessarily time-consuming.’
Prosecutors are expected to argue that Manafort’s lavish spending on suits, homes and luxury items did not match the income declared on his tax returns and that he misled lenders when he borrowed tens of millions of dollars against New York real estate.
The charges largely predate the five months Manafort worked on the Trump team in 2016, some of them as campaign chairman.
Despite a focus on financial crimes, the trial could yield politically damaging headlines about a man who ran Trump’s campaign for three months and attended a June 2016 meeting with Russians offering damaging information on Trump’s Democratic rival Hillary Clinton that is now a focal point of Special Counsel Robert Mueller’s 14-month-old investigation.
‘My guess is you will see O.J.-type frenzy at this court event,’ said Michael Caputo, a former Trump aide and longtime Manafort associate, referring to the 1995 O.J. Simpson murder case. ‘I really hope the president continues to watch and make public comments about this case.’
He said Trump could help the public understand what is at stake in Mueller’s investigation, which both Trump and Caputo have called a ‘witch hunt’ aimed at ending his presidency.
Star witness: Rick Gates, who was Manafort’s long-time deputy in Ukraine and then on the Trump campaign
Lifestyle in focus: Manafort, seen before prosecutors successfully had his bail revoked, will find his spending and his lifestyle with his wife Kathleen (right) in Mueller’s cross hairs as the special counsel’s team spend an expected ten days making their case
Joshua Dressler, a law professor at Ohio State University, said the evidence against Manafort, 69, appears strong, but that he drew a favorable judge in the 78-year old T.S. Ellis, who is known to be tough on prosecutors, and said the politically-charged climate increases the chances of a hung jury.
Manafort, who has pleaded not guilty, faces 18 counts. The nine bank fraud and conspiracy charges alone carry maximum sentences of 30 years each, and Judge Ellis noted in April that Manafort could be facing the rest of his life behind bars if convicted.
Given the strength of the evidence, however, some legal experts have suggested Manafort may be banking on an eventual pardon from Trump, who has called his former campaign chairman a ‘nice guy’ who has been treated unfairly.
The trial, starting with selection of a 12-member jury, coincides with growing speculation that Trump’s former personal lawyer Michael Cohen may cooperate with federal investigators against the president.
Mueller’s team has estimated it could take 8 to 10 days to present its case to the jury, suggesting the trial may last at least three weeks.
Mueller has submitted more than 500 pieces of evidence, including tax filings and mortgage statements, and pictures of Manafort’s expensive watches and homes.
There are 35 potential witnesses, many of them bankers and accountants expected to verify documents and speak to Manafort’s alleged intent to violate the law. Five witnesses were granted immunity.
Rudy Giuliani, a lawyer for Trump, said no one facing trial should expect a pardon, but he did not rule one out. Giuliani said he and Jay Sekulow, another Trump lawyer, had told the president: ‘This would be a very bad thing to do now.’
But once Mueller’s Russia investigation ends, Giuliani told Reuters, ‘he has a right to consider it … It´s his power.’
Mueller’s team said it would not present evidence at the trial in the Washington suburb of Alexandria, Virginia, about possible campaign collusion with Russia, potentially saving it for a second Manafort trial in Washington in September.
Even so, prosecutors have asked permission to discuss Manafort’s work for pro-Russia politicians in Ukraine, which they allege was a source of wealth he laundered through overseas bank accounts.
Lifestyle evidence: Among documents which the prosecution have filed in advance so they can introduce them at the trial is the detail of an $18,000 karaoke system at his Hamptons home
The judge has yet to rule on the request. On Monday, prosecutors laid out details of some of the evidence they hope to present.
Those include photographs of former Ukraine President Viktor Yanukovych taken as part of a campaign, as well as memos showing Russian oligarchs paying Manafort through foreign bank accounts.
If allowed, prosecutors may delve deeper into Manafort’s Russian connections. Last month Mueller’s team disclosed in a court filing what it said was a $10 million loan to Manafort from Oleg Deripaska, a magnate with close ties to Russian President Vladimir Putin.
‘It seems to me we´re seeing deeper ties that Manafort has had financially with his business deals in the Ukraine and with Russia,’ said Shanlon Wu, a former lawyer for Manafort associate Rick Gates, who pleaded guilty in February and is aiding Mueller’s probe. ‘He could expose himself to further criminal culpability if he has to expose the full extent of those ties.’
One transaction is an alleged quid pro quo arrangement between Manafort and a senior executive at the Federal Savings Bank, which public records show lent Manafort $16 million against New York properties in December 2016 and January 2017.
Prosecutors say the loans were a favor for Manafort bringing the executive, who sources say is Federal CEO Stephen Calk, into Trump’s inner circle.
Calk was named an adviser to the Trump campaign, and Democratic lawmakers say he inquired about, but did not get, a key Army post.
Federal did not respond to a request for comment.
Expected to be a main witness, Gates was Manafort’s right-hand man for years and has knowledge of their offshore accounts and work for Deripaska and in Ukraine.
Mueller’s team has indicted or secured guilty pleas from 32 people and three companies, including the indictment of 12 Russian intelligence officials. Of the four former Trump aides ensnared in the probe, Manafort is the only one to go to trial.
Gates, former national security adviser Michael Flynn and George Papadopoulos, a foreign policy adviser on the campaign, all have pleaded guilty.
Trump denies any collusion. But he and his aides have struggled to control the damage from his acceptance at times of Putin´s denials that Russia interfered over American intelligence agencies’ conclusion that it did.