Manafort’s mansion, Benz on the docket at tax-fraud trial
A Mercedez-Benz SL550. A House of Bijan watch. A Hamptons mansion with a putting green, waterfall pond and pool house. Plus bank records from Cyprus, the U.K. and St. Vincent and the Grenadines.
Images of Paul Manafort’s multimillion-dollar houses and elegant suits, along with his tax filings, loan documents and summaries of money from foreign sources, will be displayed to jurors when he goes on trial this month. Special Counsel Robert Mueller, in a filing late Wednesday, listed 436 exhibits that his prosecutors may present at the trial of President Donald Trump’s former campaign chairman as they seek to prove that he financed his lavish lifestyle through bank fraud and tax crimes.
Prosecutors will argue that Manafort hid income and offshore accounts from U.S. authorities while earning tens of millions of dollars as a political consultant in Ukraine before he joined the Trump campaign in early 2016. The latest filing shows the full sweep of evidence arrayed against Manafort, which will include dozens of documents from around the world that will illuminate his complex financial life.
“He’s in huge trouble,” said Edward Robbins, a Beverly Hills tax attorney and former federal prosecutor. “His move is obvious — plead guilty and cooperate to the extent he can against other people.”
Manafort, 69, has confounded expectations that he would fold and cooperate with Mueller as several others have done in the investigation of Russian interference in the presidential election. Despite deteriorating finances, failed pretrial motions and betrayal by his right-hand man, Manafort has held fast even while in jail and maintained his innocence.
Assuming he doesn’t plead guilty, Manafort will use the trial to attack evidence assembled by Mueller’s team. Key points of contention will be his state of mind, his control of offshore accounts and his history of offshore income, according to several tax attorneys not involved in the case.
The high-profile trial will be the first by Mueller of the 32 people he has charged. Jury selection is set to begin July 25 in Alexandria, Virginia, where Manafort has lost a series of pretrial motions to narrow the case against him.
He’s also lost fights in federal court in Washington, where in a separate case he’s accused of money laundering, obstruction of justice and acting as an unregistered foreign agent. The judge there revoked his bail and sent him to jail after prosecutors said Manafort tried to tamper with witnesses. Prosecutors also charged a former business associate with ties to Russian intelligence in the tampering matter.
In Virginia, Manafort is accused of filing false tax returns for the five years through 2014 and failing to “check the box” to disclose offshore financial accounts. Similarly, he failed to file reports of Foreign Bank and Financial Accounts, or FBARs, with the Treasury Department, prosecutors said. Manafort must also defend himself against fraud charges that he lied to banks for $20 million in loans.
To convict him of the tax crimes, jurors must conclude that Manafort knew the law and broke it anyway.
They will learn about 16 entities in Cyprus, Grenadines and the U.K. that prosecutors say Manafort used to move $75 million, including $30 million that was laundered. Money from those accounts went toward houses in New York and Virginia, landscaping services, a clothing store in Beverly Hills, an art gallery in Florida and an antique dealer in New York, prosecutors charge.
“The only defenses to checking the box ‘No’ are it wasn’t my account, I didn’t know I had to report my foreign accounts, or I disclosed the account to my accountant and he made the determination that I didn’t have to report it,” said Jeremy Temkin, a former federal prosecutor with Morvillo Abramowitz. Even if he denied owning the accounts, “then how do you explain the expenditures out of the accounts for your benefit?”
Manafort’s lawyers will most likely emphasize the complexity of international tax law, said Frank Agostino, an attorney in Hackensack, New Jersey, who formerly prosecuted U.S. tax cases.
“They’ll say, ‘There was no intent here,’” Agostino said. “It’s so complicated, how could there ever be proof beyond a reasonable doubt” that Manafort fully understood his obligation to report his offshore account?
The indictment said Manafort’s tax returns listed $504,744 in income in 2010, $3.1 million in 2011, $5.4 million in 2012, $1.9 million in 2013 and almost $3 million in 2014.
Prosecutors will likely try to prove he earned foreign income in those years, tax lawyers said. They anticipate that Manafort’s attorneys will challenge that notion, suggesting his overseas income came in earlier years.
The government’s star witness is expected to be Richard Gates, who was Manafort’s right-hand man in Ukraine for a decade and went on to work on the Trump campaign and inauguration. He pleaded guilty Feb. 23 to conspiring to deceive the U.S. government about his work with Manafort and their financial accounts.
He also admitted making false statements about lobbying work in Washington on behalf of Ukraine. In court papers, prosecutors said Gates opened 55 accounts with 13 financial institutions over a dozen years.
Manafort’s lawyers will have plenty to hammer Gates with in cross examination. In pleading guilty, Gates admitted to using $3 million from offshore accounts for his mortgages, children’s tuition and interior decorating, among other expenses. Where did all that money go? Will he get to keep it?
The central attack on his credibility will be that he lied repeatedly — to the Justice Department, to the Treasury Department and to bookkeepers, tax accountants and lawyers. He even lied to prosecutors and FBI agents three weeks before pleading guilty, he admitted.
If Gates testifies, Manafort’s lawyers will suggest he’s currying favor with prosecutors in hopes of a lesser prison sentence. The recommended range is 57 to 71 months. They might ask the jury: After he lied for so many years, why should you believe him now?
Richard Sapinski, a tax attorney, expects Gates to counter with testimony that the offshore accounts were set up with Manafort’s full knowledge. “If Gates testifies and the jury believes him — and they believe that the source of the money are fees that they earned and that they control the companies — it’s going to be very difficult to acquit Manafort,” he said.