War Of Credibility Over Rick Gates Rages On In Paul Manafort Fraud Trial

Updated at 1:46 p.m. ET

Paul Manafort's former business partner, Rick Gates, took the stand Wednesday for the third straight day in Manafort's bank and tax fraud trial as prosecutors and defense lawyers battled over Gates' credibility.

Gates spent the early part of the week corroborating prosecutors' version of events, but Tuesday afternoon and Wednesday morning, he endured a bruising cross-examination by Manafort's defense that touched on his admitted financial crimes and an extramarital affair.

Gates, who was Manafort's business partner and right-hand man, says he and Manafort used offshore bank accounts and wire transfers to hide money from the IRS to avoid paying taxes. Prosecutors also say the men falsified documents to lie to banks in order to qualify Manafort for loans.

Manafort is charged with 18 counts of bank and tax fraud, and his trial in Alexandria, Va., is the first to be brought on by indictments from special counsel Robert Mueller, who is investigating Russian interference in the 2016 election.


Manafort's defense team says it was Gates who committed the financial crimes, without Manafort's knowledge.

They argue he manipulated Manafort's finances so he could line his own pockets. Gates has admitted to embezzling from Manafort, but he says he helped Manafort evade taxes and lie to banks, at Manafort's direction.

In cross examination, defense lawyer Kevin Downing guided Gates and the jury through a wide array of lies he has told and crimes he has committed. Downing sought to paint Gates as a man not to be trusted.

Gates testified Tuesday that he had an extramarital affair a decade ago and that he embezzled hundreds of thousands of dollars from Manafort. On Wednesday, Downing seemed to indicate that Gates had more than one affair.

Downing asked Gates about whether he, in cooperating with special counsel investigators, told them "that you actually engaged in four extramarital affairs?"

Prosecutors quickly objected. After a brief conference with Judge T.S. Ellis, Downing instead asked if Gates' "secret life" encompassed the years 2010-2014, which Gates answered "it did."

The affair Gates testified about on Tuesday lasted for around five months in 2008, he said.

As part of his plea agreement to cooperate with prosecutors, Gates also admitted to lying to investigators from the special counsel's office — a fact Downing has also seized upon.

"This jury is just supposed to believe you after all the lies that you've told and the fraud you've committed?" asked Downing on Tuesday.

"Yes, because I'm here to tell the truth and take responsibility for my actions," Gates said. "Mr. Manafort had the same path. I'm trying to change."

Prosecutors redirect

While the defense's strategy seems focused on destroying Gates' credibility in the eyes of the jury, prosecutors have sought to build a document trail that corroborates testimony from witnesses, including Gates, so their case is not reliant only on him.

On Wednesday, they got another chance to question Gates after the defense completed its cross-examination.

Prosecutor Greg Andres focused his questions on the fundamentals of the case--the bank and tax fraud charges, including failure to report foreign bank accounts.

Andres walked Gates through a set of questions, having Gates repeat that he and Manafort had offshore bank accounts, including in Cyprus. Andres asked Gates if he reported those bank accounts to the IRS, and when Gates said no, Andres asked why.

"Paul Manafort directed me not to," Gates said.

Andres asked whether it took an expert to know that Cyprus is a foreign country. Gates said no. Andres asked whether it took an expert to know that the the accounts Manafort had were bank accounts. Gates again said no.

A 2014 interview

Andres also had Gates rebut a point the defense had tried to make: that Manafort and Gates were not trying to hide their offshore bank accounts because they disclosed them to the FBI in an interview in 2014.

Gates had testified that he did tell the FBI about the accounts, but told Andres that the FBI did not ask whether he and Manafort disclosed them to IRS. So while he told the FBI about the bank accounts, he did not disclose that they were not paying taxes on the income flowing through them.

Gates testified for a total of about 10 hours this week, before his testimony ended around 11 a.m. Wednesday.

FBI specialist testimony

Prosecutors then called to the stand an FBI forensic accountant, Morgan Magionos. Her testimony appears to be part of a broader strategy by the government to use documents and testimony from those familiar with Manafort's finances to prove fraud and intent, as opposed to relying only on Gates.

The government spent last week calling to the the witness stand accountants who worked with Manafort and vendors who testified about how Manafort paid for his luxury goods, including cars and custom suits, by using direct wire transfers from secret accounts overseas.

Those who dealt with Manafort's taxes said that when they asked Manafort whether he maintained any bank accounts overseas, he told them no.

Cindy Laporta, a tax accountant for Manafort, testified Monday under immunity that she helped file falsified bank loan applications for him even though she knew they were inaccurate.

She said even though she worked with Gates a lot, it was clear to her that Manafort "knew what was going on" in most instances.

That is important to prosecutors, who need to prove not only that Manafort skimped on paying millions of dollars in taxes but also that he did so with intent and not by mistake.

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