Paul Manafort Convicted at Fraud Trial in Victory for Mueller

(Bloomberg) -- A federal jury convicted Paul Manafort, U.S. President Donald Trump’s former campaign chairman, of tax and bank fraud, ending a tense legal drama and handing a crucial victory to Special Counsel Robert Mueller even as Trump and his allies questioned the legitimacy of his work.

Manafort was found guilty Tuesday of five counts of filing false tax returns, two counts of bank fraud and one count of failing to file a foreign bank account report, or FBAR. The judge declared a mistrial on 10 other counts after jurors couldn’t reach a verdict on them.

The convictions were half of a double blow to Trump on Tuesday. Even as Manafort stood stone-faced in a dark suit listening to the verdict in a Virginia courtroom, Trump’s longtime personal lawyer, Michael Cohen, was pleading guilty in Manhattan. He admitted to tax evasion, giving false statements to a bank and making illegal contributions to Trump’s presidential campaign in 2016.

Jurors found that Manafort, 69, lied to tax authorities about tens of millions of dollars he earned as a political consultant in Ukraine and lied to banks about his financial health to get loans. They deadlocked on five conspiracy counts and five other charges.

Manafort appeared stunned as he left the courtroom and returned to the Alexandria Detention Center, where he’s been held without bail since June.

“Mr. Manafort is disappointed on not getting acquittals all the way through or a complete hung jury on all counts,” his attorney Kevin Downing told reporters outside the federal courthouse in Alexandria, Virginia. He wouldn’t say whether his client will appeal.

The case was the first brought by Mueller to go to trial. The special counsel, who is investigating Russian interference in the 2016 election, has charged 32 people and secured five guilty pleas.

‘Very Sad’

The president expressed disappointment about the outcome.

“I feel very sad about that,” Trump said, adding that the case had “nothing to do with Russian collusion.”

“This is a witch hunt and it’s a disgrace,” he said. “But this has nothing to do what they started out looking for, Russians involved in our campaign. There were none.”

Manafort was convicted of filing false tax returns after prosecutors said he spent $15 million from offshore accounts for expensive properties, custom clothing, renovations to his Hamptons estate and other luxuries.

He faces eight to 10 years in prison on the tax charges alone. He’s scheduled for a second trial on Sept. 17 in Washington on charges of money laundering, obstruction of justice and acting as an unregistered foreign agent of Ukraine.

The deadlock on the conspiracy counts suggests that the jury rejected some or all of the testimony of Rick Gates, Manafort’s former right-hand man, who pleaded guilty and cooperated with Mueller’s investigation. Gates was the star prosecution witness and defense lawyers depicted him as a liar and embezzler.

Prosecutors said Manafort was desperate for cash after his work in Ukraine dried up, leading him to lie to banks as he borrowed against several properties. He was convicted of defrauding Citizens Bank of $3.4 million and Banc of California of $1 million. Jurors failed to agree on counts involving $16 million in loans from Federal Savings Bank.

Jurors took four days to deliberate, posing a handful of questions that suggested they were struggling as they waded through evidence from a two-week trial that included a raft of complex financial documents from around the world.

The question now arises of whether Trump might take the politically fraught step of pardoning his former campaign aide or commuting his sentence. Without the president’s intervention, Manafort’s only hope for leniency would be to cooperate with Mueller’s probe.

U.S. District Judge T.S. Ellis III set no sentencing date, and prosecutors have until Aug. 29 to decide whether to retry Manafort on the 10 unresolved counts.

Mueller Victory

Manafort’s crimes weren’t related to Russian interference in the election, but Mueller’s victory is still a setback for Trump, who has ratcheted up his attacks on the special counsel and urged him to end his work before the November congressional elections. Now, Mueller’s backers have a jury conviction to hold up as evidence of his progress.

Trump has sent mixed messages about Manafort. He once sought to distance himself, saying Manafort worked for the campaign for a “very short time,” even though the aide worked for the campaign from March to August 2016.

But Trump has also decried Manafort’s prosecution, saying in a tweet during the trial that he was treated worse than the late mob boss Al Capone. In recent weeks, the president has embraced the argument by some House Republicans that the inquiry was tainted from the start by anti-Trump sentiment in the FBI and Justice Department. The president’s staunchest allies in the House have called for the impeachment of Deputy Attorney General Rod Rosenstein, who appointed Mueller and is overseeing his investigation.

Despite the charges and guilty pleas Mueller has obtained, the verdict is unlikely to stop Trump’s supporters from questioning his legitimacy as special counsel.

Lavish Lifestyle

Prosecutors said at trial that the evidence of Manafort’s guilt was overwhelming. They used 27 witnesses and 388 documents to pierce the veil of lies he repeatedly told -- to U.S. tax authorities and to bankers -- to maintain a lavish lifestyle that frayed as the Ukraine business dried up. Manafort put on no witnesses and didn’t testify.

The trial shed light on Manafort’s work as a political strategist paid by pro-Russia oligarchs in Ukraine. When he advised Ukrainian President Viktor Yanukovych and his Party of Regions, those businessmen paid for his work by moving millions into shell companies in Cyprus, jurors heard.

In all, Manafort was paid more than $60 million between 2010 and 2014. By the time he joined the Trump campaign, Manafort was desperate for cash, prosecutors said.

--With assistance from Laura Curtis.

To contact the reporters on this story: David Voreacos in federal court in Newark, New Jersey, at dvoreacos@bloomberg.net;Andrew Harris in Washington at aharris16@bloomberg.net;Neil Weinberg in New York at nweinberg2@bloomberg.net;Daniel Flatley in Washington at dflatley1@bloomberg.net

To contact the editors responsible for this story: Heather Smith at hsmith26@bloomberg.net, Andrew Dunn, Andrew Martin

©2018 Bloomberg L.P.