President Trump’s former campaign manager has been accused of hiding millions of dollars in foreign bank accounts, using international wires to fund a lavish lifestyle, and lying to banks to get loans for which he didn’t qualify. While we await the jury’s decision, here is a summary of the issues surrounding the first of Paul Manafort’s two trials.
However you feel about the Trump administration, we can all agree that it has been anything but dull. The latest excitement involves the criminal trials of Paul Manafort, President Trump’s former campaign manager, who has been charged with 18 counts of tax evasion and bank fraud.
Paul Manafort is a lawyer, political consultant and lobbyist who was an advisor to numerous Presidential campaigns and was Trump’s campaign chairman during the summer of 2016. He has also lobbied on behalf of some notorious foreign leaders, including Ferdinand Marcos of the Philippines and more recently, the pro-Russia (and overthrown) former leader of the Ukraine, Viktor Yanukovych.
Since 2014, Manafort has been under investigation by the FBI for his Ukrainian dealings. He is also a person of interest in the FBI probe on Russian inference in the last presidential election.
This is the first case to be tried by Robert Mueller in his capacity as Special Counsel for the Department of Justice overseeing the investigation into links between the Russian government and the Presidential campaign of Donald Trump. Manafort’s current case, however, focuses on his financial dealings, and isn’t directly related to the Russia investigation.
The first of his two trials recently concluded in Virginia. Manafort did not testify and his defense team did not call witnesses, which is not unusual. The defense team focused its efforts on its cross-examinations of the 27 witnesses called by the government.
Manafort is accused of hiding approximately $65 million dollars in offshore bank accounts in Cyprus and other locations, lying to banks to obtain millions of dollars in loans, and using international wires to fund a lavish lifestyle that included luxury homes and very expensive clothes.
The charges against him include:
- Filing false tax returns (26 U.S. Code § 7206)
- Failing to report overseas accounts (FBARs) (31 U.S.C. § 5314)
- Bank fraud (18 U.S.C. §§ 1344)
- Conspiracy to commit bank fraud (18 U.S.C. §§ 1349)
Filing false tax returns
The government claims that Manafort reported only half of his income over a 5-year period (tax years 2010-2014). To prove this, the prosecution submitted hundreds of documents and brought forth witnesses (Manafort’s bookkeeper and of Rick Gates, his business associate), who testified that Manafort was well aware of his financial situation and reporting responsibilities.
In response, Manafort’s attorneys claimed that Gates was the one that provided the accountants with false information to hide the fact that he was embezzling from him. Throughout its cross-examination, the defense team attacked Gates’ credibility – not a difficult task since Gates had already admitted to the embezzlement, plead guilty to two felony charges, and is cooperating with the prosecutors in exchange for a lighter sentence.
Hiding money overseas
Manafort allegedly made improper use of nominee-held foreign bank accounts, using them to hide roughly half of his foreign income. A nominee-held account is where one person or entity is the registered owner (has legal title), but someone else is the beneficial owner (gets the benefits).
Gates testified that he and Manafort worked together to hide the existence of the foreign accounts from federal tax authorities, while numerous U.S. vendors provided evidence that they received international wires in payment for luxury goods or services for Manafort and his family members. The government has claimed that as the beneficial owner of the accounts, Manafort should have declared them on his tax returns and reported them on annual FBARs.
The focus of Manafort’s defense has been to shed doubt on the claim that Manafort willfully failed to declare his foreign accounts, arguing that Manafort didn’t have a sufficient financial interest in the accounts to require reporting (the threshold for filing an FBAR is a 50% or more beneficial ownership).
Committing bank fraud
Gates testified that he assisted Manafort in lying to accountants about his foreign holdings, falsifying profit & loss statements, and including false information on loan applications to get approval for millions of dollars in bank loans. Accusations against Manafort also include promising Stephen Calk, the CEO of Federal Savings Bank in Chicago, a position in the Trump administration in exchange for two loans totaling $16 million, despite recommendations from loan reviewers and senior bank officials that the loan should be rejected.
On cross-examination, the defense argued that (1) Manafort’s misstatements did not affect the loan approvals, and therefore could not constitute fraud, and (2) one of the loans was approved after Manafort secured it with two properties and some cash as ollateral. Calk never received a position in the Trump administration.
The jury is currently in deliberations.