Bending Toward Justice: Mueller files new indictment against Manafort, Gates charging tax and bank fraud

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Paul Manafort remains under house arrest after the judge overseeing the criminal case against him in Washington, D.C. federal court rejected his bond proposal. Rick Gates may be on to his third set of lawyers. And that wasn't the worst news Manafort and Gates contended with on Thursday.

Special Counsel Robert Mueller filed 32 additional criminal charges against both men, this time for bank fraud and tax fraud. The new charges were filed in federal court in Alexandria, Virginia, and not as a superseding indictment in federal court in Washington, D.C.. As Mueller’s team explained in a status report to the federal court in Washington, D.C., the new charges relate to conduct that took place in Virginia, and one of the two defendants wouldn’t agree to waive venue. That meant filing the new indictment in U.S. District Court for the Eastern District of Virginia.

The new charges significantly increase the pressure on Gates and Manafort, a time when there have been press reports that Gates is preparing to plead guilty as part of a cooperation agreement with the Special Counsel. If convicted of bank fraud, Gates and Manafort face a maximum sentence of 30 years in prison. At 68 years old, that would be amount to a life sentence for Manafort.

Like the first indictment, the new indictment against Manafort and Gates stems from their work for the government of Ukraine; the former President of Ukraine, Victor Yanukovich; and the Party of Regions, the pro-Russia political party in Ukraine. Manafort and Gates made tens of millions of dollars through their political consulting work in Ukraine, and hid the income in offshore bank accounts. Neither reported this income to the IRS. But they used these millions to buy and remodel multiple homes. Manafort also used this income on expensive clothes, rugs and other luxury items. The new indictment claims Manafort laundered more than $30,000,000 through these offshore accounts; Gates laundered more than $3,000,000.

Federal law requires that U.S. taxpayers with control over assets in a foreign bank in excess of $10,000 report those assets to the Treasury Department and the IRS. Neither Manafort nor Gates reported the required information during the years 2010 to 2014.

The bank fraud charges cover a later period, from 2015 to the present, including the time Manafort served as Chairman of President Trump’s presidential campaign. After Yanukovich was ousted from Ukraine and fled to Russia in 2014, Manafort’s income from Ukraine started to dwindle. That’s when Manafort used the real property purchased with Ukraine money laundered through the offshore account as collateral to fraudulently obtain bank loans. Gates assisted Manafort in doctoring documents submitted to the banks to secure the loans.

The new indictment doesn’t name additional defendants but it does allege that other individuals assisted in Manafort’s bank fraud scheme. For example, when describing Manafort’s effort to obtain a $5.5 million loan, the indictment states:

In addition, another conspirator on MANAFORT’s behalf submitted a falsified 2016 DMI P&L. The falsified 2016 DMI P&L overstated DMI’s income by more than $2 million, which was the amount that Lender B told MANAFORT he needed to qualify for the loan. When the document was first submitted to Lender B, a conspirator working at Lender B replied: “Looks Dr’d. Can’t someone just do a clean excel doc and pdf to me??” A subsequent version was submitted to the bank. (emphasis mine)

Manafort and Gates continued to falsify documents, despite the technological challenges they faced. The indictment describes their shenanigans:

To create the false 2016 P&L, on or about October 21, 2016, MANAFORT emailed GATES a .pdf version of the real 2016 DMI P&L, which showed a loss of more than $600,000. GATES converted that .pdf into a “Word” document so that it could be edited, which GATES sent back to MANAFORT. MANAFORT altered that “Word” document by adding more than $3.5 million in income. He then sent this falsified P&L to GATES and asked that the “Word” document be converted back to a .pdf, which GATES did and returned to MANAFORT. MANAFORT then sent the falsified 2016 DMI P&L .pdf to Lender D.

The new charges add another level of complexity to an already complex criminal investigation. And the additional legal pressure on Manafort and Gates give the Special Counsel’s office more opportunities to gain their cooperation in the core investigation into the Russia’s interference in the 2016 campaign and whether the Trump campaign conspired with Russians to carry it out.

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