Manafort Lawyer Calls Turncoat Gates a Liar With His ‘Hand in Cookie Jar’

(Bloomberg) -- Blame it on Gates.

That’s Paul Manafort’s defense against tax- and bank-fraud charges in the first trial to come out of U.S. Special Counsel Robert Mueller’s probe of Russian interference in the 2016 election.

President Donald Trump’s former campaign manager never committed any crimes and was betrayed by his right-hand man, Rick Gates, who embezzled millions of dollars and lied to prosecutors to stay out of prison, Manafort’s lawyer told jurors Tuesday at the start of the trial.

Manafort Lawyer Calls Turncoat Gates a Liar With His ‘Hand in Cookie Jar’

Manafort is accused of lying on his tax returns after making more than $60 million as a political consultant in Ukraine, concealing Cyprus bank accounts from U.S. authorities, and lying to banks to get $20 million in loans. With his tax-free earnings, Manafort splurged on luxuries such as a $21,000 watch and a $15,000 ostrich jacket, a prosecutor told jurors.

But while the outlines of Mueller’s case were well known before the trial began, Manafort’s attorney Thomas Zehnle for the first time revealed the defense strategy of fully shifting blame to Gates. Zehnle said Gates repeatedly betrayed Manafort, including by stealing from their political consulting company. Gates has pleaded guilty and is cooperating with Mueller’s prosecutors.

“This case is about trust, and he placed his trust in the wrong person. That man is Rick Gates,’’ Zehnle told the jury of six men and six women. “We’re primarily here because of one man -- Rick Gates. The foundation of the special counsel’s case against Mr. Manafort rests squarely on the shoulders of this star witness.’’

Manafort Lawyer Calls Turncoat Gates a Liar With His ‘Hand in Cookie Jar’

With that declaration, Zehnle announced that Gates will come under withering attack by Manafort, a mentor who made his protege a rich man in Ukraine and later drew him to the Trump campaign as deputy chairman. Zehnle seemed to say to the jury -- in this knife fight, only one man can win, and it will be Manafort.

A verdict may come down to who the jury believes, although prosecutors say they have reams of documents and many other witnesses to back up their case against Manafort. They’re seeking to ensure that any damage that Manafort does to Gates doesn’t hurt their overall case.

Manafort, who is in custody during the trial, wore a black suit with a white shirt and gray tie. He consulted frequently with his lawyers as the jury was selected in half a day.

A conviction on the most serious charges might mean an effective life sentence in prison for the 69-year-old Manafort. For Mueller, an acquittal or a hung jury could have repercussions for his entire probe and spur more calls from the president and Republicans in Congress for the investigation to be shut down. Manafort still faces a second trial in Washington in September on related charges.

In his opening statement, Assistant U.S. Attorney Uzo Asonye depicted Manafort as a greedy businessman who hid tens of millions of dollars from the Internal Revenue Service, failed to declare offshore tax accounts in required reports, and lied to three banks about his income and net worth to secure loans when he was desperate for cash.

"A man in this courtroom believed the law did not apply to him,” Asonye said, referring to Manafort. “He got whatever he wanted.”

Zehnle addressed Manafort’s wealth and lifestyle directly. He said Manafort lived a life that most can only dream of, and that his client had been handsomely rewarded. “We don’t contest that,” the attorney said.

But he “could not be everywhere at once,’’ so he relied on Gates to fill operational and financial roles and to serve as the main contact to back-office employees, Zehnle said. Despite Manafort’s trust in him, Gates “embezzled millions of dollars from his employer,’’ Zehnle said.

Cookie Jar

“Rick Gates had his hand in the cookie jar,’’ Zehnle said. “Little did Paul know that Rick Gates was lining his own pockets.’’

Manafort also never set up Cyprus accounts that prosecutors say are at the heart of his fraud, Zehnle said. Rather, other people set up accounts that wealthy backers of the Ukrainian Party of Regions insisted on using to pay him, Zehnle said.

“Paul Manafort did not create this arrangement, and he was certainly not trying to mislead or defraud the Internal Revenue Service,’’ Zehnle said.

That’s not how prosecutors see it. Manafort knew that he was required to report his income to the IRS and disclose his foreign accounts to U.S. authorities, Asonye said. But he gave his accountants and bookkeepers false details about his shell companies and income.

“Paul Manafort was shrewd,’’ he told jurors. “His wealth was obvious. After all, he owned seven houses.’’

Bank Loans

The special counsel contends Manafort also flouted U.S. banking laws because as his money from Ukraine dried up in 2015 he needed more to sustain his lifestyle. For that he got loans from three different banks by lying to them about the property he owned, his debts and his income. "He even lied about where he was living," Asonye said.

Tad Devine, the Democratic political consultant who helped guide Bernie Sanders’s presidential campaign in 2016, was the first prosecution witness. Devine said he began working with Manafort in 2005 in Ukraine for the pro-Russia Party of Regions, and they ran campaigns there until 2010 when Viktor Yanukovych was elected president in 2010 after overcoming low public-opinion polls.

Manafort and Yanukovych had a “very close relationship,” Devine said. Manafort “dealt with him directly.”

On Wednesday, jurors will hear from political consultant Dan Rabin and an FBI agent, prosecutor Greg Andres told the judge at the end of the day.

The Manafort cases are U.S. v. Manafort, 17-cr-201, U.S. District Court, District of Columbia (Washington), and 18-cr-83, U.S. District Court, Eastern District of Virginia (Alexandria).

©2018 Bloomberg L.P.