The Legal Woes of Paul Manafort

On Tuesday, July 31, 2018, the first trial of Special Counsel Robert Mueller’s investigation commenced as former Trump campaign chair Paul Manafort faces a litany of charges relating to financial crimes and money laundering in Virginia. The financial crimes in question are quite spectacular and could result in sending Manafort to prison for the rest of his life. Yet, it’s merely a sideshow to Mueller’s larger investigation into the Trump campaign and Russia.

Paul Manafort’s trial is about an enormous amount of money he made during his years working Ukraine’s government and political leaders as well as the hefty loans he received from US banks. Mueller has alleged a years-long scheme of astonishing scope. According to him, Manafort first laundered $30 million from a web of undeclared offshore accounts into the US without paying taxes on it. After the Ukranian money stopped rolling in, he defrauded several US banks to get $20 million in loans. Manafort has pleaded not guilty on all counts.

However, many others think it’s really about Mueller trying to put pressure on Manafort so he’ll flip on Donald Trump and provide information about Russian collusion with the Trump campaign. Though the special counsel hasn’t confirmed such strategy, he has admitted to investigating Manafort regarding collusion and that his past work for a pro-Russian Ukranian political faction and other Russian ties seems obviously relevant.

In his political career, Manafort is somewhat of a legend within Republican circles who rose to fame with his work for Ford’s 1976 and Reagan’s 1980 presidential campaigns. After Reagan’s victory, Manafort decided to cash in by starting a lobbying, consulting, and PR firm alongside campaign colleague Roger Stone. The firm became infamous for representing controversial authoritarian regimes or opposition leaders abroad who served as proxies for the Reagan administration’s anticommunist foreign policy. With his media mastery, Manafort helped sanitize crooks like Philippines President Ferdinand Marcos and his shoe hoarding wife, Imelda, despite the number of people killed during their regime. Along with Angola’s Jonas Savimbi, Congo’s Mobutu Sese Seko, and Kenya’s Daniel Arap Moi, these thuggish dictators should never have been respectable figures in Washington. But Manafort reinvented them as allies in the cause of democracy and successfully lobbied for them to receive arms and aid from the US government. Yet, he’d also occasionally jump back into US politics such as manage the 1996 Republican National Convention.

As communism fell, the former Soviet Union became the scene of one of the biggest historic swindles. In Russia, the KGB steered billions of dollars into offshore bank accounts during the USSR’s dying days. These funds became the basis for some of the fortunes of the characters now appearing in the Russiagate scandal. During this time, it’s said that now Russian President Vladimir Putin amassed wealth totaling more than $40 billion. Russians who invested in Donald Trump over the years had many motives. Yet, the nature of kleptocracy suggests they were likely attempting to relocate their money to a place where it would both disappear from public view and have protections coming with the American rule of law.

By around 2004, Paul Manafort pursued bigger payoffs abroad through advising fantastically rich oligarchs in the former Soviet Union on how to master tumultuous democratic politics. He advised Russian billionaire Oleg Deripaska. But eventually his efforts focused on Ukraine, landing a lucrative contract to advise its pro-Russian Party of Regions and its leader Viktor Yanukovych. When Manafort got the gig, the political party was unpopular and in opposition. Yet, over the next few years, he’d orchestrate the party’s return to power and Yanukovych’s 2010 election as president. Once Yanukovych was in office, Manafort became enormously influential in the regime. According to the Atlantic, Manafort had “walk-in” privileges and billed “outrageous amounts,” while advising on domestic politics and lobbying in the US. During these years, Mueller claims that Manafort earned over $60 million. But in 2014, it all fell apart when demonstrators forced Yanukovych out of power and he fled to Russia. Meanwhile, Manafort and Deripaska had a falling-out with the latter suing the former over cheating him of millions. Nonetheless, during Manafort’s years in Ukraine, the country hemorrhage more than $118 billion in illicit financial flows. This theft came at the expense of its development as a market economy, sucked funds away from public investment, as well as eroded faith in democracy and Western institutions.

In 2015, Paul Manafort saw another opportunity in Donald Trump’s presidential candidacy. As an outsider candidate, Trump needed someone with expertise on party and convention rules who could lock down delegates for him. Since two longtime Manafort associates had Trump’s ear like Roger Stone and wealthy real estate investor Tom Barrack had pitched him for the job. After Trump hired Manafort in March 2016, his primary job was primarily leading a delegate-wrangling operation. But his portfolio gradually expanded until he was running the campaign. After then chairman Corey Lewandowski was drummed out for assaulting a Breitbart reporter in May, Manafort was officially named campaign chair and chief strategist. He then ran the effort through the last few primaries and the Republican National Convention for free. However, by mid-August, Trump had sunk in the polls while Manafort was dogged by damaging news reports questioning the legality of his Ukranian payments. So Trump forced him out and brought Kellyanne Conway and Steve Bannon to take over. As 2017 progressed with the Mueller’s Russia investigation, Manafort came under increased scrutiny resulting in his October indictment with new charges added this year.

Though Mueller originally indicted Paul Manafort in Washington, he wasn’t ready to bring the tax and bank fraud charges against him. This was either due to bureaucratic holdup or due to his team still assembling evidence there. But by February 2018, Mueller was ready to file them. But the catch was that the law required some of the counts charged in Alexandria, Virginia where Manafort actually lives. Unless Manafort specifically gave Mueller permission to charge him in DC, which wasn’t going to happen. This posed an interesting dilemma for him. On one hand, it’s easier and less expensive to just prepare for one trial than 2. Also, 2 separate trials give the prosecution 2 separate opportunities, before 2 different judges and different juries to convict him. This makes it a lucky break to get him off the hook entirely less likely to happen. On the other hand, Washington DC’s population is far more liberal and nonwhite than that of Virginia’s Eastern District. Manafort likely thought he had a better acquittal chance in the latter venue. Moreover, the specific charges that would be brought against him in Virginia likely played into his thinking. Compared to the DC charges, there are more of them and are generally viewed tougher to beat as well as mean a longer prison sentence. However, Manafort’s team hoped the Washington trial would be first since the charges were filed much earlier. But Virginia is known as a “rocket docket” for its speed in bringing cases to trial.

Paul Manafort’s trial in Virginia is about his money, particularly how he made it as he faces 18 counts. It’s expected to last 2-3 weeks. The government’s evidence exhibit list and witness list are both public, giving us a fairly good idea of the prosecution’s plans. Mueller’s team is presenting an assortment of financial documents, emails, photos, and other evidence to record Manafort’s spending from offshore accounts and alleged false bank loan submissions. As for witnesses, Mueller’s team is expected to potentially call up to 35 people to testify. Since this is a money case, they’re generally not big names. More likely, the witnesses are mostly accountants, financial institution employees, and little-known employees at Manafort’s firm.

However, there are 2 exceptions. First there’s iTad Devine, a Democratic consultant most famous for advising Bernie Sanders’ 2016 presidential campaign. But before that, he worked alongside Manafort in Ukraine. But the government’s star witness is Rick Gates, Manafort’s right-hand man who worked with him in Ukraine and the Trump campaign. In October 2017, Gates was charged alongside his boss in Mueller’s probe, but struck a plea deal in February 2018. Since he was Manafort’s closest business associate during this period, his testimony about what his boss said or thought could be important. On Monday, August 6, 2018, Gates took the stand against his old boss. Gates testified that he and Paul Manafort knowingly committed several crimes. At his boss’ direction, Gates didn’t report 15 foreign financial they controlled to the US government, even though they knew it was illegal. He also testified that Manafort directed him to send millions in foreign cash as phony “loans” to his US companies in order to avoid paying taxes on them. But even more damning, Gates admitted to embezzling hundreds of thousands of dollars from those accounts without Manafort’s knowledge, which the defense team has signaled they’d seize upon in an attempt to discredit him.

Beyond publicly claiming his innocence and hiring some expensive lawyers who’d take him, Paul Manafort’s defense strategy is basically trying to pin as many allegations against him as they can on Rick Gates instead. In fact, defense lawyer Thomas Zehnle has focused much of his opening statement attacking Gates, claiming that Manafort had merely, “placed his trust in the wrong person,” accusing Gates of embezzling, and calling Gates the “foundation of the special counsel’s case.” Obviously, this is a longshot strategy since Mueller’s team has already called 30 other witnesses and has plenty of documentary evidence to make the case that Manafort knew what he was doing. So they’re not just relying on Gates’ word alone. Nonetheless, given the sheer volume of evidence, going after Gates is the defense’s best bet. Should Gates come off as credible to the jury, Manafort is sunk. But should the defense’s attack on Gates succeed in planting doubt in jurors about the prosecution as a whole, that could be Manafort’s best chance of avoiding a guilty verdict.

The first set of charges, which Mueller refers to as “the tax scheme,” relate to Manafort’s flush years when the Ukranian money poured into his coffers by the tens of millions in US dollars. According to Mueller, Manafort set up a complex web of offshore shell companies before spending $30 million of that cash in the US between 2008 and 2014. About $12 million of that offshore money was spent on personal items for Manafort and his family spread across over 200 transactions. This includes about $5.4 million to a home improvement company in the Hamptons, $1.3 million tied to a Virginia antique rug store, $849,000 or so to a New York men’s clothing store, $819,000 on landscaping, and several payments for several Range Rovers and a Mercedes Benz. Another $6.4 million in offshore cash was wired for 3 real estate payments: $1.5 for a New York City condo, $3 million for a Brooklyn brownstone, and $1.9 million for a Virginia house. On top of that, Manafort allegedly sent another $13 million as “loans” to US companies he controlled. Yet, the government call these “shams” designed to fraudulently reduce his taxable income. According to Mueller, all this violated the law in 2 ways:

  • False income tax returns (5 counts): Manafort didn’t report any of this money on his income tax returns or taxes paid on it. He also lied on those tax returns that he had no authority over any financial accounts in foreign countries. He faces one count for each tax year from 2010-2014.
  • Failure to report foreign bank or financial assets (4 counts): Manafort also didn’t report any of his foreign accounts to the Treasury Department by filing a legally required disclosure called a FBAR form. He faces one count for each year from 2011-2014.

Then there’s the second set of charges which Mueller refers to as “the financial institution scheme.” According to him, after Yanukovych was deposed and the Ukranian money dried up, Paul Manafort was desperate for cash and made a series of fraudulent to banks in an effort to get hefty mortgage loans or “to have the benefits of liquid income without paying taxes on it.” All the charges here are either bank fraud (4 counts) or bank fraud conspiracy (5 counts) relating to several different loans from 2015-2017, which are:

  • To get $3.4 million on a New York City condo, Manafort falsely told a lender that the property was a second home when it was a rental. But he failed to disclose previous mortgage debt, and falsely claimed it was forgiven after the lender discovered that debt.
  • Searching for another loan, Manafort submitted a doctored profit and loss form to a different potential lender overstating his consultant firm’s income by more than $4 million.
  • To get a $5.5 million loan on a Brooklyn brownstone, Manafort didn’t disclose that he already had a loan on that property and got an associate to submit a form overstating his firm’s income by $2 million.
  • To get loans of $9.5 million and $6.5 million on 2 properties, Manafort again submitted doctored profit and loss forms overstating his family’s income by millions. He also falsely claimed he had $300,000 debt on his American Express card only because he lent it to his former aide Rick Gates.

Though sprawling as it seems, Paul Manafort’s Virginia trial is just the start of his legal woes since Mueller has also indicted him on a set of 7 charges in Washington DC for a trial scheduled in September. Generally, this DC trial will focus more on Manafort’s actual work in Ukraine, rather than his money. The charges include conspiracy to defraud the United States and making false Foreign Agent Registration Act (FARA) statements. Additionally, in June, Mueller brought 2 new charges related to attempted witness tampering. According to the special counsel, Manafort and a Russian associate contacted witnesses and urged them to give a false story. After these new charges, DC Judge Amy Berman Jackson sent Manafort to jail to await trial, arguing he’d “abuse the trust” placed in him by the court system.

While the many, many charges against Paul Manafort are egregious, they have nothing to do with Russia interfering in the 2016 presidential election. But he has been a central figure in the Mueller probe’s aspect for the very obvious reasons he spent years working for pro-Russian politicians in Ukraine and was in debt to a Russian oligarch. Then there are 2 curious incidents during the Trump campaign Manafort was tied to. First, in June 2016, he attended Donald Trump Jr.’s infamous Trump Tower meeting with a Russian lawyer and other Russia-tied figures. Though attendees claimed that despite the meeting was set up with the promise on Hillary Clinton dirt, nothing of consequence happened.
Second and more importantly, there’s a set of suspicious contacts Manafort had with 2 Russian nationals. One was the aforementioned Russian oligarch he’s indebted to, Oleg Deripaska. The other is his former employee from Ukraine Konstantin Kilimnik, who Mueller says has ties to Russian intelligence. Kilimnik was also indicted in June alongside Manafort for alleged witness tampering but it’s unlikely he’ll face trial in Russia.

Anyway, during the 2016 campaign, Manafort and Kilimnik exchanged a series of cryptic emails about Deripaska and apparently, money. In April 2016, Manafort asked, “How do we use to get whole. Has OVD operation seen?” Kilimnik wrote that July, “He will be most likely looking for ways to reach out to you pretty soon.” Manafort answered, “If he needs private briefings we can accommodate.” At the end of the month, Kilmnik wrote that he had met with, “the guy who gave you your biggest black caviar jar” and that “I have several important messages from him to you.” Investigators believe that “black caviar” refers to money. We’re not yet sure what was going on here. It could be where Trump-Russia collusion occurred. Yet, it’s just as likely that Manafort was going rogue trying to get paid since he was desperate for cash at the time. Nonetheless, while Mueller continues investigating Manafort for collusion-related crimes, no charges have yet resulted from that part and its current status remains unclear.

Publicly, more of Robert Mueller’s activity has been focused on Paul Manafort than on any single person involved in the Russia investigation despite that none of the 25 charges against him so far have anything to do with election interference. The most common proposed explanation is that Mueller believes Manafort has important information for the collusion probe. And that he’s brought so many other charges against him as pressure in hopes he’ll “flip” and spill what he knows. Given how the special counsel charged Rick Gates with past Ukraine-related crimes and withdrew nearly all counts as soon as he agreed to cooperate, it seems very likely. Though it’s also possible that Mueller is sending Manafort to prison for what he sees as repeated violations and doesn’t really care whether he flips or not.

Still, if Mueller is trying to get Paul Manafort to flip, it hasn‘t worked. As of now, he faces 25 charges that could easily put him in jail for the rest of his life and the evidence of many if not most of these counts appear quite strong. But Manafort has pleaded not guilty to everything and has given no public indication he’s considered flipping. Why? Perhaps he has nothing to flip with. Either Manafort wasn’t involved in the collusion or has nothing on Donald Trump or anyone else Mueller cares about. But it’s more likely that Manafort is just holding out hope that he can beat the charges. A darker possibility is that, given an apparent series of Russian-linked assassinations in the West, Manafort fears violent reprisals against himself or his family should he give information implicating Russians. However, given that Gates worked alongside him for Russia-connected clients and still flipped, the idea doesn’t hold water. Unless Gates is an insanely brave man. But criminal associates usually flip to avoid something whether it be a long prison sentence or worse. And that Gates most likely flipped since he’s much younger on Manfort and has young children.

Nonetheless, the most likely reason that Manafort keeps mum is that he’s holding out for a Donald Trump presidential pardon. After all, last year, The New York Times reported that Trump’s then-lawyer John Dowd discussed a possible presidential pardon with Manafort’s lawyer. Rudy Giuliani has recently floated the idea as well. Yet even a pardon may not be a get-out-of-jail-free card. There’s a host of complications involved ranging from potential state charges against him which Trump can’t pardon away to the prospect that Manafort would no longer be able to avoid testimony by pleading the Fifth on certain matters. Besides, given to what befell Michael Cohen, Trump is unlikely to pardon anyone unless the outcome is beneficial to him. Say what you want about Joe Arpaio and the Hammonds, but their pardons at least appeal to the Republican base. Given that Manafort is somewhat a legendary figure among Republicans, holding out for a pardon might work in his favor. However, the fact he’s gained notoriety as a man who worked for pro-Russian oligarchs and dictators for cash to buy an ostrich coat, we shouldn’t bet on it.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s