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The Mystery of Paul Manafort’s Foreign Bank Accounts

On Day 4 of the highly publicized fraud trial, Mueller’s team is following the money both home and abroad

Paul ManafortFormer Trump campaign chairman Paul Manafort status conference at US District Court, Washington, USA - 14 Feb 2018Former Trump campaign chairman Paul Manafort departs the federal court house after a status hearing in Washington, DC, USA, on 14 February 2018. Manafort is facing a dozen charges discovered during the Russia investigation.

Former Trump campaign chairman Paul Manafort.

SHAWN THEW/EPA-EFE/REX/Shutterstock

ALEXANDRIA, VIRGINIA — On the fourth day of Paul Manafort’s trial, the invoices and photos attesting to the luxurious lifestyle of President Trump’s former campaign chairman were replaced by talk of K-1 forms and gross receipts, Schedule Bs and Schedule Es. The ostrich jacket and silk suits were gone. This was peak tax wonkery.

For much of the morning, Uzo Asonye, a federal prosecutor on Special Counsel Robert Mueller’s team, pressed one of Manafort’s former accountants, Philip Ayliff, about the defendant’s tax returns. The prosecution introduced various tax worksheets and emails between Manafort and his accountants, as well as working papers from Ayliff’s firm, KWC

At first hard to follow, Asonye’s strategy snapped into focus midday. His brusque, rapid-fire style began to look more methodical as he drilled down into the bedrock of the case — namely, the allegations that Manafort hid $30 million in overseas income from the federal government and failed to report his foreign bank accounts as required by law.

The 12 jurors in the case already know that Manafort funded his extravagant lifestyle with money that flowed through Cyprus, a country accused of being a money-laundering hub for wealthy Russians. The prosecution brought, as they say on the Internet, the receipts: Manafort’s wife’s new Mercedes, the renovations to their Bridgehampton home, that $15,000 ostrich jacket. Over the past few days, Mueller’s lawyers have proved that all of these and more were paid for via wire transfers from Cyprus.

Ayliff, one of Manafort’s accountants at KWC, repeatedly told prosecutors that he was unaware of any overseas bank accounts controlled by Manafort because his client never disclosed them. That wasn’t because Ayliff didn’t ask — his firm, we learned, made repeated attempts each year to discern whether Manafort had overseas accounts and if he needed to file a Reports of Foreign Bank and Financial Accounts (FBAR) report. According to Friday’s testimony, Manafort, sometimes through his colleague Rick Gates, repeatedly insisted that he had no such overseas accounts to report. “They never told us about any income that was deposited in foreign accounts,” Ayliff testified.

Ayliff’s replacement on the Manafort account at KWC, Cynthia Laporta, took the stand in the afternoon and echoed much of her predecessor’s story. Even after the IRS ramped up its scrutiny of overseas bank accounts controlled by Americans, and even after KWC ratcheted up its own efforts to make sure its client disclosed such accounts, Manafort said there were none.

There was no ambiguity in Manafort’s denial. Asonye, the federal prosecutor, introduced an email from KWC to Manafort and his associates in which KWC asked yet again about overseas accounts and Manafort insisted his financial status had not changed from the year before.

Asonye also asked Laporta about Manafort and Gates’ financial maneuvers that included recording foreign income as loans to themselves in order to lower their tax burdens, as alleged by the government. Laporta said she doubted the two mens’ explanations for the loans.

In one of the day’s most dramatic moments, Laporta, who agreed to testify under a grant of immunity, said that she didn’t believe what Manafort and Gates had told her about their taxes. “I could have refused to file the tax return,” she said. “I could have called Mr. Manafort and Mr. Gates liars, but Mr. Manafort was a longtime client of the firm and I did not want to do that either.”

The prosecution asked her how she felt about her actions.

“I very much regret it,” Laporta said.

Laporta went on to testify that she participated in a scheme with Manafort and Gates that involved what she believed were falsified financial records in order to qualify Manafort for a loan. She said that she told an employee of Citizens Bank that a rental property of Manafort’s in Manhattan was actually a second home so that Manafort could “get a better rate” on a loan.

When the bank asked Laporta to show that Manafort had more “liquidity” in order to secure the loan, Laporta turned to Gates for help. Gates allegedly told her that one of Manafort’s supposed loans had been forgiven, and so Manafort had more money on hand that previously known. When asked by Asonye whether she believed what Gates and Manafort had told her about the forgiven loan, she replied: “Uh, no.” But she testified that she used backdated documentation produced by Gates in the bank negotiations.

Kevin Downing, Manafort’s lead defense attorney, made his debut speaking appearance in the trial when he sought to poke holes in Ayliff’s testimony. Downing argued that a suspect loan on the books of Manafort’s former consulting firm wasn’t so strange, and that Manafort’s allegedly suspect use of rental properties in New York was legal.

At one point, Downing also took the position that Manafort had not tried to keep his accountants in the dark about his income and finances because he had been so forthcoming with documentation as the accountants were preparing his tax returns. “Nobody intending to violate the law would leave the evidence around for his accountant to find it,” Downing said.

But by all indications — including Judge Ellis’ minimal interjections as the day wore on — the government’s lawyers had built a strong case that Manafort failed to reveal the full extent of his income. He’d apparently hid information from the accountants he’d hired to prepare his tax returns, according to those same accountants, who had relied on him for accurate and complete information. If true, that gets right to the heart of the prosecution’s bank fraud and tax evasion allegations.

Of course, Manafort’s defense is trying to place the blame squarely on Gates, who has pleaded guilty and is cooperating with Mueller’s team. Gates has yet to take the stand — that could happen as early as next week — and he is already being called the “star witness.” It is now more clear than ever that Manafort’s fate rests in the hands of the former business partner with whom he worked so closely.

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