Manafort trial day 4: Prosecutors dive into the money trail and a key witness admits to helping Manafort commit financial fraud

  • Cindy Laporta, Paul Manafort’s longtime tax preparer, gave critical testimony Friday in Manafort’s criminal trial about his and Rick Gates’ alleged tax and bank fraud.
  • Laporta was granted immunity in exchange for her testimony, and she said she helped the two men commit financial fraud while working on Manafort’s tax returns.
  • Laporta joined Manafort’s bookkeeper, Heather Washkuhn, and CPA, Philip Ayliff, in saying that she was unaware Manafort controlled over a dozen foreign bank accounts that loaned money to his political consulting firm while she managed his finances.

Sign up for the latest Russia investigation updates hereยป

ALEXANDRIA, Virginia – On Friday, Cindy Laporta, a longtime accountant for Paul Manafort, admitted to helping Manafort and his deputy, Rick Gates, falsify financial documents in an effort to commit tax fraud.

Laporta’s testimony was part of a high-stakes criminal trial against Manafort after prosecutors working for the special counsel Robert Mueller charged him with tax and bank fraud, conspiracy, failure to register as a foreign agent, and obstruction of justice.

Gates was initially a codefendant until he pleaded guilty to two counts related to conspiracy and lying to the FBI in February. Gates is the prosecution’s star witness and is expected to testify against Manafort early next week.

Laporta, however, is perhaps the most significant witness for the prosecution up to this point. She works for KWC, the tax firm that lists Manafort as a client, and she began managing his taxes in 2014.

In some ways, Laporta’s testimony mirrored that given by Philip Ayliff and Heather Washkuhn – Manafort’s former CPA and bookkeeper, respectively. All three people said they were unaware Manafort controlled over a dozen offshore entities, many of which gave money to Manafort’s political consulting firm.

They also testified that they often did not receive the underlying documentation they requested to support transactions that Manafort and Gates falsely characterised as loans on Manafort’s tax returns and financial statements.

The most significant moment on Friday, however, came when assistant US attorney Uzo Asonye asked Laporta to describe a conference call in September 2015.

Manafort’s finances took a hit in 2015 after his firm lost its biggest client, Viktor Yanukovych, the previous year, after Yanukovych was ousted from the Ukrainian presidency and fled Ukraine amid widespread demonstrations against his leadership.

During the conference call, Laporta said Gates asked Manafort’s tax preparers to alter the amount of a loan so that Manafort would owe less in income taxes.

Specifically, Laporta testified that Gates said Manafort’s tax bill was “too high” and that Manafort “didn’t have the money” to pay it.

“He was trying to reduce income and therefore, income taxes,” Laporta said, adding that she believed such conduct was “inappropriate.”

But Conor O’Brien, then an employee at KWC, suggested in an email the prosecution displayed that “the loan amount may need to be changed.”

Laporta testified that they all ultimately decided to decrease the loan amount by $US900,000 on Manafort’s 2014 tax returns before submitting his 2015 one so that Manafort could afford to pay his bills. It’s unclear which loan specifically was altered.

Laporta, who was granted immunity, testified that she changed the loan amount but “very much” regretted her actions. She said the altered loan meant Manafort owed $US400,000 to $US500,000 less in taxes in 2015.

On September 16, 2015, the day after the tax return was filed, Gates emailed Laporta a Word document version of a loan agreement dated March 16, 2014 between Davis Manafort Partners International and a company called Telmar Limited. The prosecution alleges that Telmar is a company located in Cyprus that Manafort controls.

Laporta testified that the 2014 loan agreement “didn’t exist before the conversation” she had with Gates in 2015.

The document had Manafort’s signature.

“To your knowledge, was the $US900,000 loan from Telmar ever repaid?” Asonye asked Laporta.

“No,” she replied.

“Was there ever any interest payment?” he asked.

“No,” she said, adding that there was also never any principal payment.

“Was this the last time that DMP International claimed that funds received from Telmar were loans?” Asonye asked.

“No,” Laporta said.

Laporta: Manafort’s comments were ‘inconsistent’ with what was on his financial documents

Laporta’s testimony took up most of the day on Friday as prosecutors used her to walk through several other documents they claim illustrate additional instances of tax and bank fraud from Manafort and Gates.

In one such instance, Laporta testified that Manafort tried to retroactively classify one of the properties he owns as a secondary residence instead of a rental, as it was originally listed.

Manafort emailed Laporta in December 2015 telling her he was applying for a mortgage from Citizen Bank for a property located on Howard Street in Manhattan. But in March that same year, Gates had emailed Laporta saying the Howard Street property was being used as a rental throughout the year, and that it had been listed as such on Manafort’s 2015 tax return.

In other words, Laporta said, Manafort’s comments to the bank about how the property was being used were “inconsistent” with what was on his tax return.

Later, the bank said there was an issue with Manafort’s finances. Specifically, it pointed to a $US1.5 million loan from a company called Peranova Holdings, another entity prosecutors say Manafort controlled. The bank said it wanted to see more money in Manafort’s account to repay the loan.

Laporta testified that she told the bank, at Manafort’s or Gates’ direction, that the loan had been forgiven. She added that she then went along with Gates’ decision to create a fraudulent letter, backdated eight months before their conversation, indicating that the loan amount had been forgiven.

She said she knowingly sent the fraudulent letter to the bank because she thought the institution would vet the document.

In another instance, Laporta testified that Manafort attempted to have her add an additional $US2.4 million in income to his financial statement in 2016 to secure another bank loan. She said Manafort came to her with the request because Washkuhn would not comply with it.

At the time, DMP International had reported losses of nearly $US640,000 on its profits and loss statement.

When Asonye asked Laporta whether she believed Manafort was getting the $US2.4 million in additional income, which he said would be deposited in November of that year, Laporta said she “had no idea.”

She added that she never sent the revised statement because she did not receive any underlying documentation to support Manafort’s claim.

But in August, she emailed the bank, Federal Savings Bank, with Manafort and Washkuhn copied, and said the $US2.4 million of additional income would be reflected on Manafort’s financial statement by November 2016. She said she sent the email after Manafort directed her to do so.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.