Rick Gates, the feds’ star witness in the trial of Paul Manafort, took the stand on Monday and made jaws drop with his admission to a wide range of crimes, both with and against his old boss. His inside knowledge could convince the jury to send Manafort to the slammer for years. But Gates’ admissions of his own serial lying, forgery, and crimes against Manafort could also play right into the hands of the defense.
Welcome to Rabbit Hole.
Why Gates matters: The prosecution’s case so far has followed a narrative path that moves both chronologically forward in time and from the outside of Manafort’s circle inward. Until this point, the jury has heard lots of very complicated accounting evidence from mostly third parties who, with the exception of accountant Cindy Laporta, weren’t implicated in the alleged bank fraud and tax crimes. Gates is the first person who’s been able to translate the binders full of numbers and alien accounting terms into the things that matters most: Manafort’s alleged criminal knowledge and intent.
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Like a fine Persian rug from Manafort’s million-dollar collection, the feds hope that Gates’ testimony can really tie the room together.
Rick does crimes: A whole lot of them. It’s not just that he was forging loan paperwork to help Manafort cheat on his taxes and mortgage. It’s also that he embezzled “several hundred thousand” dollars’ worth of fake expenses from Manafort’s company using phony expense reports. He testified that he also lied in a lawsuit deposition at Manafort’s direction, lied to credit card companies, and helped a friend forge a letter to an investment company.
And that’s a problem: The prosecution has labored through several witnesses and dozens of exhibits to emphasize that Gates was committing crimes with Manafort in order to further his boss’s personal interests. But the embezzlement admission tees up the theory at the heart of the defense’s theory: that Gates’ crimes were not always aimed at his boss’s best interest and he had demonstrated a willingness to commit crimes against Manafort.
Lies: Gates has had problems with the truth before, as the lying to the FBI charge in his plea agreement established. He’s lied whenever it served him, in fact: to banks, credit card companies, and his boss, to name a few. Among the lies that could harm the prosecution is Gates’ admission that he lied under oath in a previous civil deposition. Gates said his lies there were at Manafort’s direction, but it doesn’t take much trial experience to realize how this is going to play out on cross examination:
“You lied to a court before, Mr. Gates, so why should we believe your testimony now?”
The Gates firewall: That may be why prosecutors have been eager to emphasize in previous cross examinations that there are two phases to Manafort’s alleged crimes: the period when he was getting rich off his Ukrainian political consulting from 2011 through 2014 and hiding money from the IRS to pay for a lavish lifestyle, and the period from 2015 to 2016 when the Ukrainian revolution kneecapped his consulting business and he was committing new crimes to try and maintain that lifestyle.
The vendors who testified before Gates said that they’d either never met him or only interacted with him after 2014. In 2015, when the money was drying up and Manafort was allegedly forging loan paperwork, witnesses have testified that Gates was more directly involved.
Minimum reserve culpability: The segmentation between the two periods appears to have a firewall effect for prosecutors: if the jury buys the defense’s argument that Gates cooked the books behind his boss’s back on the mortgage and tax fraud charges stemming from 2015 to 2016, they still have to contend with the international wire transfer evidence from 2011-2014 that points to more income tax evasion and more direct involvement by Manafort.
Early red flags: There’s plenty of reason to think that the 2011-2014 evidence is enough to sink Manafort even if the jury doesn’t buy Gates’ testimony, not least because both his own banks as well as federal prosecutors were suspicious of him in that period. The suspicions have only dribbled out in testimony from Manafort’s vendors. A contractor who did construction on his estate in the Hamptons testified that his bank closed down his account shortly after receiving an international wire transfer from one of Manafort’s Cyprus-based companies. His luxury video installer testified that something similar had happened when he received a international wire transfer from Manafort.
That jibes with reporting from BuzzFeed in February that claimed banks had filed at least 23 suspicious activity reports (SARs) on Manafort from 2004 through 2014. SARs don’t themselves amount to criminal allegations and Manafort’s defense team was quick to try and explain away the account closures as the overly nervous actions of institutions that get hives when they see certain international transactions. But BuzzFeed reported that federal prosecutors were aware of Manafort’s shady dealings and considering prosecution as early as 2014 as part of an investigation into the American partners of kleptocrats like Yanukovych.
What the feds need from Rick: It’s crucial for prosecutors that Gates’ testimony ties Manafort to two firms, Telmar Investments and Peranova. The government claims Manafort used Telmar to reclassify income as a loan and cut his tax bill and that he pulled a similar maneuver in reverse with Peranova, turning a loan which Manafort used to buy a house in New York into income in order to get a better mortgage rate. So far the testimony in the trial has shown Gates was the most active in forging the Telmar and Peranova paperwork, which would seem to make sense given the many other forgeries he admitted to Monday. Gates’ job for the feds is to convince the jury that he wasn’t just freelancing a financial crime spree behind his boss’s back.
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