Rick Gates testifies to 'modified' invoices involving payments to Paul Manafort

Former Trump campaign chairman Paul Manafort's right-hand man testified on Tuesday that Manafort instructed him not to tell their firm's bookkeeper about payments from accounts in Cyprus that held millions of dollars in earnings from consulting work for pro-Russian politicians in Ukraine.

Rick Gates, the U.S. government's star witness in Manafort's trial on tax fraud and bank fraud charges, told a Federal Court jury in Alexandria, Va., that there were hundreds of emails showing Manafort approved payments out of the Cypriot accounts.

Gates's testimony on the trial's sixth day was part of the prosecution's effort to prove that Manafort was responsible for financial manoeuvrings that he and other witnesses have testified included filing false tax returns and failing to report foreign bank accounts.

Gates, Manafort's longtime business partner, is expected to face a tough cross-examination later on Tuesday by defence lawyers in the first trial to arise from special counsel Robert Mueller's investigation into Russian interference in the 2016 U.S. election.

The Kremlin denies election meddling.

Manafort's defence is seeking to pin the blame on Gates himself, who has acknowledged embezzling from Manafort's firm.

Rick Gates is seen in the background in this July 17, 2016 file photo as then-Trump campaign chairman Paul Manafort talks to reporters on the floor of the Republican National Convention in Cleveland. Manafort has pleaded not guilty to 18 charges. (Matt Rourke/Associated Press)

Manafort, 69, has pleaded not guilty to 18 counts of bank fraud, tax fraud and failing to disclose foreign bank accounts.

Gates, who also was an official on Trump's campaign, pleaded guilty in February to lying to investigators and conspiring to defraud the United States and agreed to cooperate.

On Tuesday, Gates also testified about "modified" invoices for payments to U.S. vendors that he said he created at Manafort's request. The invoices were created to meet document requirements of a bank, Gates said, adding that the payments were legitimate.

Work dried up after Ukraine leadership change

He testified about a complex scheme in which earnings from Manafort's political work in Ukraine would be paid by Ukrainian businessmen using companies in Cyprus to other Cyprus-based companies controlled by Manafort.

Prosecutors showed contracts laying out that Manafort would be paid $ 4 million US a year in quarterly instalments of $ 1 million, all channelled through Cyprus. The funds were logged as loans, but Gates testified they were in fact compensation to Manafort.

Money from the Ukraine work dried up after pro-Russian President Viktor Yanukovych was forced from power in 2014, Gates testified. A $ 1-million payment for work in 2014 was "significantly past due" and "Mr. Manafort was quite upset the money had not been sent," Gates told the court.

Manafort's Kyiv-based aide, Konstantin Kilimnik, was able to collect $ 500,000, Gates said, but "to my knowledge, it was never paid in full." Kilimnik was indicted in the Mueller investigation in June.

Gates, 46, testified Monday that he helped falsify Manafort's tax returns and hide his foreign bank accounts. He testified he has met with prosecutors about 20 times. It is unclear what other information he may have provided to Mueller's team.

It's related to their work for Ukraine's pro-Russian government, before they worked for Donald Trump's election campaign. 2:52

Gates admitted on Monday that he did steal money through inflated expense reports, but said it was hundreds of thousands of dollars, not millions as defence lawyers stated.

Manafort's lawyers are expected to use the theft to try to undermine Gates's credibility as a witness. They also are likely to bring up his making false statements to investigators.

One issue that could be a challenge for prosecutors on Tuesday is the extent to which they are allowed to admit evidence about Manafort's Ukraine work and the oligarchs who paid him. On Monday, U.S. District Judge T.S. Ellis repeatedly clashed with prosecutors about the relevance of such testimony and once again urged them to speed things along.

While outside the scope of this trial, Mueller is also investigating whether Trump campaign members co-ordinated with Moscow. President Donald Trump denies that allegation, although he admitted in recent days on social media while referring to a controversial 2016 meeting at Trump Tower that his team was open to getting "information on an opponent."

Manafort was Trump's campaign chair for nearly five months in 2016, as he locked up the party's presidential nomination and was then celebrated at the Republican National Convention.

The current trial is the first of two that Manafort faces.

In D.C., he is charged with conspiracy to launder money, conspiracy against the United States, making false statements and charges in connection with failing to register as a foreign agent, despite lobbying in the United States for Yanukovych.

That trial is scheduled to start in September.

Manafort was confined to his home awaiting trial until June when the judge in the D.C. case, U.S. District Judge Amy Berman Jackson, revoked his bail amid witness tampering allegations.

Trump has sought to minimize Manafort's role in his campaign, but has said in interviews and on social media that he believes the longtime operative has been treatly unfairly.

With files from CBC News

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