Politics

Paul Manafort suggested his banker to be Trump's Secretary of the Army, Rick Gates testifies

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Key Points
  • Rick Gates testified in federal court Tuesday that his longtime business partner Paul Manafort suggested appointing one of his bankers to a role in then-President Elect Donald Trump's administration.
  • Gates returned to the witness stand Tuesday in U.S. District Court in Virginia to face a grilling from lawyers from his former boss.
  • Manafort, who has pleaded not guilty to all charges of bank fraud, conspiracy and failing to file foreign account reports, could be sentenced to as much as 30 years in prison for each of the most serious counts.
This courtroom sketch depicts Rick Gates, right, answering questions by prosecutor Greg Andres as he testifies in the trial of Paul Manafort, seated second from left, at the Alexandria Federal Courthouse in Alexandria, Va., Monday, Aug. 6, 2018. 
Dana Verkouteren | AP

Rick Gates testified in federal court Tuesday that his longtime business partner Paul Manafort suggested appointing one of his bankers to a role in then-President Elect Donald Trump's administration.

Chicago's Federal Savings Bank had extended Manafort $16 million in home loans from December 2016 to early 2017, NBC News reported in February. The bank's founder and CEO, Stephen Calk, was one of Trump's economic advisors during the 2016 campaign and sought to become the Secretary of the Army under the new administration,  according to Gates' testimony and prior news reports.

"We need to discuss Steve Calk for Sec of the Army," Manafort wrote Gates in a November 2016 email. Manafort had resigned as Trump's campaign chairman in August 2016, but Gates, who was also a top campaign official, continued working on Trump's post-election transition team.

Special counsel Robert Mueller, whose team of U.S. attorneys are currently prosecuting Manafort in the bank fraud and conspiracy trial, is looking into whether those loans were offered as part of a deal to land a job in the Trump administration, two people with direct knowledge of the matter told NBC.

Representatives from Federal Savings Bank did not immediately respond to CNBC's requests for comment. The White House did not immediately respond to CNBC's request for comment.

Gates grilled for second day

Gates returned to the witness stand Tuesday in U.S. District Court in Virginia to face a grilling from lawyers from his former boss.

Gates began his second day in court under questioning from U.S. attorney Greg Andres, providing more details about how he and his ex-partner used Cypriot shell companies to move money made through their lobbying work for a pro-Russian political party in Ukraine.

He was also reportedly presented with exhibits allegedly showing Manafort approving a money transfer from one of those accounts in an email conversation. Gates said "there were hundreds" of emails showing Manafort approving such payments.

Gates testified that when the leader of that party, Viktor Yanukovych, was ousted in 2014, Manafort's cash flow dried up and he had difficulty paying his bills. Prosecutors showed the jury an email from Manafort complaining to Gates about his high taxes that year, calling it "a disaster."

Gates described editing profit and loss statements for both himself and his boss. He told prosecutors that Manafort's income was lower in 2015 "because he had zero clients at the time." He said that in March 2016, he doctored a ledger from Manafort's accounting firm to inflate his boss' income by $6 million above its real figure in order to help him qualify for a loan.

The beleaguered ex-assistant corroborated an earlier witness' testimony, saying he was involved in efforts to falsify financial documents to help lower Manafort's tax bill. That previous witness, accountant Cindy Laporta, testified under immunity that Gates asked Manafort's accounting firm to change a loan amount to benefit their client.

The company, KWC, told CNBC that Laporta was put on leave in the wake of her testimony, which detailed misconduct the company said it was "unaware" of.

"The entire KWC leadership team is shocked by Ma. Laporta's testimony, which clearly represents that she failed to meet the Firm's high standards for professional and ethical conduct in her work for Mr. Manafort," KWC said in a statement.

Gates' testimony on Tuesday also shed light on a number of mysterious exhibits that had been presented to witnesses by Mueller's team throughout the trial.

Prosecutors had asked a number of the vendors paid by Manafort through foreign wire transfers to look at certain invoices with errors on them. One invoice was ostensibly from Alan Couture, a high-end New York City men's store where Manafort had bought exotic items, such as a $15,000 ostrich jacket and an $18,500 python coat. But the document contained spelling errors and listed an incorrect zip code, according to testimony from the owner's son.

Stephen Jacobson, a witness who had been paid millions by Manafort for home repairs, was shown an invoice with his company logo but said it was "not my invoice."

On Tuesday, Gates told prosecutors that he was the one who had created those invoices. But he testified that while they were "modified" invoices, they were still "legitimate" payments.

Kevin Downing (L) and Thomas Zehnle (R), attorneys for former Trump campaign chairman Paul Manafort, arrive at the Albert V. Bryan United States Courthouse August 7, 2018 in Alexandria, Virginia. Manafort has been charged with bank and tax fraud as part of special counsel Robert Mueller's investigation into Russian interference in the 2016 presidential election. 
Win McNamee | Getty Images

Gates' second day of questioning could very well become the most contentious day of the trial, as Manafort's lawyers are likely to get their chance to cross-examine him later in the day. The defense team has cast Gates as an embezzler who deceived Manafort for his own interests, and blamed him for any willful attempts to break the law.

Gates was first called to the stand Monday afternoon by federal prosecutors. He wasted little time before telling prosecutors he committed crimes with, and at times at the direction of, Manafort. He also admitted stealing hundreds of thousands of dollars from his former boss by filing false expense reports.

Gates reached a plea deal earlier this year and agreed to cooperate with special counsel Robert Mueller's Russia investigation. He could face between up to nearly six years in prison as part of that agreement, though the special counsel could request a shorter sentence based on his cooperation.

Manafort, who has pleaded not guilty to all charges of bank fraud, conspiracy and failing to file foreign account reports, could be sentenced to as much as 30 years in prison for each of the most serious counts.

This is a developing story. Please check back for updates.

--Reuters and NBC News contributed to this report.