Frauds and Swindling

What It Means: The Indictment of Manafort and Gates

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New details about a high-profile raid

In fact, MANAFORT and GATES had: selected Company A and Company B; engaged in weekly scheduled calls and frequent emails with Company A and Company B to provide them directions as to specific lobbying steps that should be taken; sought and received detailed oral and written reports from these firms on the lobbying work they had performed; communicated With Yanukovych to brief him on their lobbying efforts; both congratulated and reprimanded Company A and Company B on their lobbying work; communicated directly with United States officials in connection with this work; and paid the lobbying firms over $2 million from offshore accounts they controlled, among other things. In addition, court-authorized searches of MANAFORT and GATES’ DMI email accounts and MANAFORT’S Virginia residence in July 2017 revealed numerous documents, including documents related to lobbying, which were more than thirty-days old at the time of the November 2016 letter to the Department of Justice.

In July, Mr. Mueller’s team and the F.B.I. executed an unusual search warrant at Mr. Manafort’s home in Virginia in which, rather than knocking on his front door, they picked the lock and burst inside, seizing documents and copying computer files. Such an unannounced intrusion is permitted only when prosecutors convince a judge that a defendant may destroy evidence if given any warning.

The indictment suggests what was behind the raid. After questions arose about whether Mr. Manafort had failed to register as a foreign agent for Ukraine, his firm denied the allegations but also told federal investigators in November 2016 that they had no records about the work because their policy is to destroy emails after 30 days.

This line in the indictment shows what prosecutors found in that raid: documents related to his lobbying for Ukraine that Manafort’s lobbying company had told federal investigators did not exist — one of the bases for charges of making false statements.

Hiding foreign bank accounts

Furthermore, in each of MANAFORT’s tax filings for 2008 through 2014, MANAFORT represented falsely that he did not have authority over any foreign bank accounts. MANAFORT and GATES had repeatedly and falsely represented in writing to MANAFORT’s tax preparer that MANAFORT had no authority over foreign bank accounts, knowing that such false representations would result in false MANAFORT tax filings. For instance, on October 4, 2011, MANAFORT’S tax preparer asked MANAFORT in writing: “At any time during 2010, did you [or your wife or children] have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account or other financial account?” On the same day, MANAFORT falsely responded “NO.” MANAFORT responded the same way as recently as October 3, 2016, When MANAFORT’S tax preparer again emailed the question in connection with the preparation of MANAFORT’s tax returns: “Foreign bank accounts etc.?” MANAFORT responded on or about the same day: “NONE.”

Americans who hold assets in offshore bank accounts are required to disclose information about those holdings to the federal government, including for tax purposes. The indictment alleges that Mr. Manafort and Mr. Gates violated those laws.

Defrauding lenders

After MANAFORT used his offshore accounts to purchase real estate in the United States, he took out mortgages on the properties, thereby allowing MANAFORT to have the benefits of liquid income without paying taxes on it. Further, MANAFORT defrauded the banks that loaned him the money so that he could withdraw more money at a cheaper rate than he otherwise would have been permitted.

The indictment shows how the investigators’ deep scrutiny of Mr. Manafort’s financial dealings helped them uncover additional alleged offenses that resulted in charges. For example, Mr. Manafort “used his hidden overseas wealth to enjoy a lavish lifestyle in the United States, without paying taxes on that income,” according to the indictment, by having his overseas entities buy real estate and then taking out mortgages on those properties, freeing up cash.

The indictment details several such transactions in which Mr. Manafort is accused of falsely telling the bank he was either living in the properties or was using the borrowed funds for construction, thereby gaining access to a lower interest rate.

Conspiracy against the United States

From in or about and between 2006 and 2017, both dates being approximate and inclusive, in the District of Columbia and elsewhere, the defendants PAUL J. MANAFORT JR., and RICHARD W. GATES III, together with others, knowingly and intentionally conspired to defraud the United States by impeding, impairing, obstructing, and defeating the lawful governmental functions of a government agency, namely the Department of Justice and the Department of the Treasury, and to commit offenses against the United States, to wit, the violations of law charged in Counts Three through Six and Ten through Twelve.

The first charge against Mr. Manafort and Mr. Gates is conspiracy, a powerful tool used by prosecutors. Two people are guilty of the crime of conspiracy if they agreed to commit a crime and took any step toward that goal. Conspiracy charges also permit prosecutors to hold each defendant responsible for the actions of the others within a plot. Here is a primer on how conspiracy charges may fit into the Trump-Russia probe.

An unusual basis for money laundering charges

(a) transport, transmit, and transfer monetary instruments and funds from places outside the United States to and through places in the United States and from places in the United States to and through places outside the United States, with the intent to promote the carrying on of specified unlawful activity, to wit: a felony Violation of the FARA, in Violation of Title 22, United States Code, Sections 612 and 618 (the “Specified Unlawful Activity”), contrary to Title 18, United States Code, Section 1956(a)(2)(A); and

(b) conduct financial transactions, affecting interstate and foreign commerce, knowing that the property involved in the financial transactions would represent the proceeds of some form of unlawful activity, and the transactions in fact would involve the proceeds of Specified Unlawful Activity, knowing that such financial transactions were designed in whole and in part (i) to engage in conduct constituting a Violation of sections 7201 and 7206 of the Internal Revenue Code of 1986, and (ii) to conceal and disguise the nature, location, source, ownership, and control of the proceeds of the Specified Unlawful Activity, contrary to Title 18, United States Code, Section 19S6(a)(1)(A)(ii) and l956(a)(1)(B)(i).

Money laundering charges require that the financial transactions involved be designed to conceal that funds came from an underlying unlawful activity. Typically, such charges are pegged to a crime like drug trafficking. Here, prosecutors say, the underlying activity is instead the failure by Mr. Manafort and Mr. Gates to register as a foreign agent while conducting lobbying activities for Ukraine that were otherwise lawful in and of themselves. That is an aggressive move by Mr. Mueller’s team.

Mueller is going after Manafort’s assets

52. Pursuant to Fed. R. Crim, P. 32.2, notice is hereby given to the defendants that the United States will seek forfeiture as part of any sentence in accordance with Title 18, United States Code, Sections 981(a)(1)(C) and 982(a)(1) and(a)(2), and Title 28, United States Code, Section 2461(c), in the event of the defendants’ convictions under Count Two of this Indictment.

As part of the pressure Mr. Mueller and his team is putting on Mr. Manafort, they are signaling in this indictment that if he is convicted of various charges, the government will seek to seize various properties and a life insurance policy linked to those charges — or any other assets he may have, if those are no longer available. This gives Mr. Manafort an additional incentive to cooperate as part of a plea deal that could allow his family to keep some of those assets.

Where will Mueller go next?


Mr. Mueller’s personal signature appears at the end of this indictment, a rare direct acknowledgment of his work. Little has been heard in public from Mr. Mueller since he took the assignment of special counsel, even as political commentary about him and his work has raged — especially from President Trump, who has called the special counsel investigation a “witch hunt” and on Monday reiterated on Twitter that there was “no collusion” with Russia and said of the indictment, “Sorry, but this is years ago, before Paul Manafort was part of the Trump campaign.”

The indictment, though undoubtedly significant, also raises the question of what Mr. Mueller’s next step will be. But it is widely believed that Mr. Mueller is hoping to pressure Mr. Manafort into flipping and becoming a cooperating witness, providing information about the central subject of his investigation: the relationship between the Trump campaign and Russia.

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Wendy Pettit

Wendy Pettit is a writer for NYT and writes for other publications on her spare time. She lives in Chicago with her husband and her dog Zuko.

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