Gates corroborates accountant's testimony on falsely reclassifying income as debt

Manafort was unhappy about his 2014 income tax project, and tasked Gates with working with his accountant to reduce the burden, Gates testified Tuesday. 

The jury was shown email exchanges that reveal Manafort's displeasure. 

"I just saw this, WTF," Manafort wrote to Gates about his 2014 income tax projection. "How could I be blindsided like this? This is a disaster." 

Gates corroborated Laporta's testimony by testifying that he and Laporta falsely reclassified income as a debt. Laporta testified last week that this move saved Manafort about $500,000 in income tax that year.

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Government rests its case against Paul Manafort

Prosecutors rested their case against Manafort around 5 p.m. Monday, and the jury is dismissed for the day.

Judge T.S. Ellis will talk to the defense about their potential witnesses, with the jury due back at 9:30 a.m. Tuesday.

Manafort's defense attorney previews closing argument

Judge T.S. Ellis heard arguments from both sides to consider allowing a witness to testify about Paul Manafort's foreign bank account reporting responsibilities.

Prosecutor Uzo Asonye said that the jury needs to see these filings because it shows that Manafort knew what the law was and violated it anyway. He said the defense is planning on arguing that Manafort didn't own more that 50 percent of DMP International, LLC and thus was not personally responsible for filing an FBAR for the company.

For his part, defense attorney Thomas Zehnle said that there has been no evidence that shows that Manafort had to file an FBAR on behalf of DMP. "They've already thrown the kitchen sink at him," Zehnle said. "Now they're throwing the plumbing and pipes."

Ellis asked Zehnle if his team is planning on arguing that during closing. After initially saying they wouldn't, defense attorney Richard Westling asked for a moment to consult with Zehnle.

Zehnle then said that the government had a chance to indict DMP but chose not to, instead indicting Manafort alone. Manafort's personal reporting responsibilities goes to intent, he said and that they plan to argue that Manafort was not responsible for filing DMP's foreign bank records.

Ellis called a 15-minute recess to consider the matter but warned that "neither side is going to be happy" with whatever he decides.

After the recess, Ellis heard more argument.

Asonye said that after consulting with the defense counsel, he understands that they intend to argue that the Cypriot accounts that Manafort controlled were in fact DMP International's accounts. If that's the case, he said that the government needs to further address Manafort's willfulness by calling Paula Liss back to testify as to his reporting requirements.

Ellis called another recess to consider the matter but said if he grants the request, he'll instruct the jury to consider Liss' testimony only in regards to willfulness.

Testimony: Federal Savings Bank took a hit for Manafort's loans

When Richard Westling resumed his cross examination, he asked Brennan about the process of approving the loan for 377 Union Street in Brooklyn.

The defense showed the credit memorandum Brennan wrote for the loan, which he would do at the last stage for all loans. He provided a risk rating of 4 — which is considered “average.” Over a 4 rating, a risk is considered troubled and is not approved.

Brennan said later in Greg Andres' redirect that he didn’t think the loan should be rated a 4, but that the loan should not be made. However, since the loan was already  approved, he had to provide at least a 4 rating as higher ratings are not approved.

Brennan said he had collected information on Manafort as part of the process and identified two key credit risk issues  his past work for foreign governments provided an unknown risk to the bank, and his New York properties potentially losing value if the housing market crashed.

Throughout his cross, and re-cross, Westling sought to sow doubt in the bank’s proficiency and blame them for the errors on Manafort’s applications. He asked Brennan about an issue with the Bridgehampton loan that incorrectly computed Manafort’s income, an error that made it look larger. Westling also pointed out that some at the bank were aware that Manafort’s initial Union Street loan was in default.

Westling also asked Brennan about the information inputted on the 1003 form, or the loan application, implying someone other than Manafort might have provided the incorrect information, rather than Manafort himself.

He also asked if P&L sheets can be provided by others, including accountants, bookkeepers or business associates. Brennan said they could be.

After, Andres asked Brennan if Federal Savings Bank made money off the Manafort loans. Brennan answered that the bank took a hit and wrote off the loans. He said the bank is still owed $11.8 million, but he didn’t specify how to account for the discrepancy from $16 million.

Banker: 'Red flags' on Manafort's loan application overruled by CEO reportedly interested in Trump administration job

James Brennan, a vice president at the Federal Savings Bank, testified that there were issues with a loan that Paul Manafort applied for, but CEO Stephen Calk approved it anyway.

Prosecutor Greg Andres walked Brennan and jury through a series of loans that Manafort applied for. Brennan testified that there were discrepancies on the applications about Manafort's income, his assets and his liabilities.

Brennan testified that Manafort didn't disclose outstanding loans he had on other properties and that Manafort was delinquent on his American Express card. The bank also learned that Manafort's company had no income as of August 2016.

Andres asked Brennan if these factors were important in deciding whether or not to approve Manafort's loan. "It goes to the issue of character," Brennan said. Andres showed the jury an internal bank email saying the president of Federal Savings Bank, Javier Ubarri, had turned down the loan because of these problems. Ubarri's decision, however, was overturned.

"The loan closed because Mr. Calk wanted it to close," Brennan said.

Brennan is the third witness to testify under immunity and could be the government's final witness of the trial. 

Manafort attorney Richard Westling asked Brennan several questions about the collateral Manafort put up for the loans from Federal Savings Bank. For the loan on his Bridgehampton home, Manafort put up that house, which the bank valued at $12 million, his $2.7 million condo in Alexandria, and $615,000 in cash. Brennan said this amount was “pretty standard” for a loan of that size.

Westling also asked Brennan about Manafort’s Amex credit card debt, which he said Manafort paid off in October 2016, helping Manafort’s credit. Brennan said Manafort had “acceptable credit.”

Pete Williams

Good afternoon. Here's what prosecutors filed ahead of court convening today.

Robert Mueller's prosecutors say Paul Manafort's false statements to officials of The Federal Savings Bank are legally relevant, even if the bank had its own motives for wanting to approve his loan applications.

That's true, the prosecutors say, even though bank executive Stephen Calk pushed for approval because he hoped to get positions in the Trump campaign or the administration.

"Contrary to the suggestion advanced during a sidebar conference on August 10, 2018, however, even if Calk intended to approve Manafort’s loans for reasons relating to his personal interests, that would have no bearing on the materiality of Manafort’s false and fraudulent representations to the bank," they said in a brief filed Monday a few hours before court was to convene at 1 p.m.

Manafort's former partner, Rick Gates, has testified that Manafort directed him to alter the firm's profit-and-loss statement for 2015 and allowed Manafort to change the 2016 statement, as well. Bank officials say the loans were approved because Calk overruled the loan officers and personally approved them.

Judge T.S. Ellis, in a sidebar conference that the jury could not hear, expressed some concern with the notion that the bank could be defrauded, given that Calk approved the loan for personal reasons. That doesn't matter, the prosecutors say. What's important is that Manafort intended to defraud the bank by making false statements in his loan applications.

Court adjourns. What's ahead for Monday?

Just before court adjourned for the day, Judge Ellis talked to counsel for both sides about logistics for next week.

Court will begin at 1 p.m. on Monday, and the prosecution will rest its case that day, Andres said. Both sides said they want two hours each for closing arguments.

It's no accident that TV programs are half an hour, Judge Ellis said, and if you think that you can hold a jurors' attention for two hours, you're living on a different planet. Nevertheless, he granted the request.

See you next week.

What do the Yankees have to do with this?

As the afternoon waned, the government agreed to call two quick witnesses after Raico, rather than the longer witness they originally planned to call.

Irfan Kirimca is the senior director of ticket operations for the New York Yankees. He said he oversees all aspects of ticket operations for the organization.

Government counsel Brandon Van Grack pulled up the financial records for Manafort’s ticket account. The chart showed Manafort’s season ticket account holdings from 2010 to 2017, though Kirimca said Manafort was a ticket holder prior to 2010 as well. The account was in Manafort’s name, and paid for by Manafort, Kirimca testified. 

Manafort had four seats to all 81 home games of the season.

During Raico’s earlier testimony, the government published Manafort’s Amex statement showing the 2016 Yankees season ticket purchase with regard to his outstanding debts while applying for loans. Rick Gates had testified that Manafort asked him to say he used the card to purchase the tickets for himself.

The government showed an email exchange between Yankees employees and Manafort, where Manafort asked that his tickets to be shipped to his Fifth Avenue address. The employee goes on to ask Manafort, “Will you and Kathy be attending Opening Day?” Manafort answered that they would be in attendance.

 Finally, Van Grack asked Kirimca about Gates. Kirimca testified he’d interacted with Gates over email, but testified that Gates never said he’d be paying, and never asked the tickets to be shipped to him. He said he searched the organization’s records for Gates and found there were no records and no ticket accounts.

“Was Rick Gates a season ticket holder?” Van Grack asked. “No,” Kirimca said.

In Manafort attorney Richard Westling’s cross, he asked Kirimca if it was unusual for people to buy tickets to use for business entertainment, to which he said no.

Bank CEO made overtures to Manafort regarding Trump administration job, Raico says

Raico said on the stand Friday that when he was reviewing Manafort’s documents at the beginning states of the loan process, he noticed Manafort worked in politics. He called his boss, Federal Savings Bank CEO Stephen Calk, as he knew “Steve was interested in politics.” Raico testified that Calk then wanted to meet Manafort.

Raico said he had dinner with Manafort, Calk, bank president Javier Ubarri and others in New York City in late July of 2016. Raico said the preliminary loan approval documents were submitted that same day, and were approved by the next day.

On August 3, 2016, Manafort emailed Raico with the subject line “Need Steve Calk resume.” Stephen Calk is the CEO of Federal Savings Bank, from which Manafort received $16 million in home loans. 

Why? government counsel Greg Andres asked Raico.

“Because Mr. Calk asked if he could serve the Trump administration,” Raico answered.

Raico also testified Friday that days after the presidential election, on November 11, 2016, Calk called Raico asking him to reach out to Manafort, as Calk hadn’t spoken to Manafort “in a day or two.” Raico said Calk asked him to call Manafort to ask if he was in consideration for Secretary of Treasury or Secretary of the Army. Raico said he did not place the call because it made him “very uncomfortable.”

Dennis Raico testifies to Manafort loan applications

Dennis Raico was Day 9's first witness, the government's 24th overall. Raico is one of the government’s five witnesses who had been granted immunity for his testimony.

Raico is a senior vice president at Federal Savings Bank. He worked on two loans Manafort received from the bank totaling $16 million. The first loan was for $9.5 million and closed on November 16, 2016 and the second was for $6.5 million, closing January 4, 2017.

The first loan initially began as a construction loan for Manafort and then-son-in-law Jeff Yohai for properties in California and Manafort’s Bridgehampton home. In an unconventional move, Manafort asked the terms be changed at the closing table, dropping the California homes and requesting a cash out refinance loan on the Bridgehampton property using his Virginia home as cross-collateral.

The second loan was a consolidated takeout loan on Manafort’s property at 377 Union Street in Brooklyn.

Raico described Manafort and Yohai to be “a bit disorganized, unstructured, scattered.”

As underwriters were looking at Manafort’s financials in August 2016, Raico said there were some “discrepancies” in his income. “A plus B didn’t equal C all the time,” Raico testified. 

In October of 2016, Manafort emailed Calk citing a “major issue.” He said he’d told Calk he had a $2.5 million payoff for his Bridgehampton home when it was in fact a $3.5 million payoff. “I look to your cleverness on how to manage the underwriting,” Manafort wrote.

On October 19, during the closing of this first loan, Raico got a call that Manafort no longer wanted to include his California properties. He said Manafort rewrote the terms of his own loan, something that was “not bank policy,” but when asked by Ellis if it was wrong to do so, answered “no.” He said he’d never seen a loan get restructured at the lending table.

Raico also said he has never seen CEO Calk get involved in approving a loan. Raico described Calk as “very involved.”

With the new structure of the loan, Raico said income was a determining factor on whether or not it would go through. In this scenario, tax returns and P&Ls were required.

On October 20. 2016, bank president Javier Ubarri wrote Raico saying the bank would not proceed with the loan. However, Calk had called earlier approving the loan.

On October 28, 2016, Manafort signed the loan application with the boilerplate stipulation that providing false information was a federal crime. The loan closed on November 16, 2016, with Calk’s approval.

Court is now back in session, but no details on delay

After hours of intrigue and speculation, court resumed at 2:21 p.m. with a short bench conference between Judge Ellis, defense attorney Richard Westling and prosecutor Greg Andres. Andres called the prosecution's next witness: Dennis Raico. So what required two sidebars, two recesses and and extra-long lunch break? We don't know.