For years, Paul Manafort held fast to the idea that he could get away with hiding millions of dollars earned for political consulting work for pro-Putin interests in Ukraine. That idea has now collapsed and this week, Manafort faces his first trial for tax fraud and related crimes in Virginia.
On Tuesday, his former associate Rick Gates testified against the former Trump campaign manager for the second day in a row. He explained how he worked with Manafort to hide the Ukraine earnings through a web of falsified records. Shell companies in Cyprus with “ghost directors” accepted the payment for their work, while Gates explained that he drew up fake invoices supposedly sent to the shell companies meant to help obscure that Manafort paid for items in question himself. Manafort is the one who ultimately had control of the bank accounts, Gates explained.
One of the items that’s been pointed to by prosecutors is a $15,000 ostrich jacket from Alan Couture. Gates crafted an invoice made to look like it was from Couture to the shell company Global Endeavor when in reality, Manafort paid for the item himself with his hidden money that traveled through the shell companies. The disgraced former political operative hid accounts — with Gates’ help — in the United Kingdom and St. Vincent and the Grenadines in addition to Cyprus. The false invoices were crafted for banks in the Grenadines that required such documentation, and the transactions themselves were kept hidden from U.S. tax authorities.
Gates testified that Manafort directed him against reporting the transfers from the secret accounts that he himself had a stake in to his bookkeeper, Heather Washkuhn. That way, Manafort got out of paying taxes on the cash that he’d hidden underneath shell companies with “ghost directors.”
Although “in reality it was money moving between the accounts,” Gates also shared that Manafort directed him to attribute millions of dollars in income to loans from a shell company that in reality belonged to Manafort. On the flip side of that, Gates also testified that he had accountants working for his and Manafort’s firm reclassify fake loaned money as income so that they would look more financially inviting to banks they were seeking further loans from.
Gates pleaded guilty earlier this year to conspiracy and lying to the FBI, leaving Manafort as the sole former Trump associate holding onto claims of innocence in the face of charges from Special Counsel Robert Mueller’s team. In Virginia, he currently faces 18 criminal counts of tax evasion, bank fraud, and conspiracy. Later this year, he faces a criminal case in Washington, D.C., over issues like his failure to register as a foreign agent while working as one in the United States.
Donald Trump’s name has been barely mentioned during Manafort’s trial, which on Tuesday hit its sixth day. Gates at one point mentioned the work he did for a 2016 presidential campaign; that campaign was Trump’s, but Gates didn’t specifically identify it. Trump has worked at times both to distance himself from the allegations against Manafort and to complain about his former campaign manager’s treatment.
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