OLIGARCH’S EXTRAVAGANT PAYMENTS TO MANAFORT CAME TO END IN 2014
man and now to prisoner in an Alexandria, Va., jail awaiting a jury verdict — is a tale of greed, deception and ego. His trial on 18 charges of bank and tax fraud has ripped away the elaborate facade of a man who, the story went, had moved the swimming pool at one of his eight homes a few feet to catch the perfect combination of sun and shade, and who worked for the Trump campaign at no charge to intimate that for a man of his fabulous wealth, a salary was trivial.
His trial also underscores questions about how someone in such deep financial trouble rose to the top of the Trump campaign, spreading a stain that has touched the president’s innermost circle. The formidable parade of more than 20 witnesses and hundreds of exhibits has further eroded the notion, advanced by President Donald Trump, that the special counsel investigating Russian interference in the 2016 election, Robert Mueller, is on a “witch hunt.”
The trial is also a spectacle of small humiliations for Manafort, 69. His once perfectly coifed dark hair, admired by Trump, is now gray and shaggy without the benefit of a stylist. Manafort’s shirts, which he once bought by the half dozen for $1,500 each, are now delivered by his wife to his lawyer in a white plastic bag. Their communication consists of him winking at her or forming a silent kiss as he is led in and out of the courtroom. He has been admonished not to turn around in his courtroom seat to look at her.
A subplot of the saga is the betrayal of Manafort by his longtime deputy, Rick Gates, who had been at his side for the past dozen years. A former senior official of both the Trump campaign and the Trump inaugural committee, Gates has testified that he helped execute Manafort’s fraudulent schemes while simultaneously stealing hundreds of thousands of dollars from him, apparently because he felt that Manafort was not dividing the riches from Ukraine fairly.
Gates, 46, has pleaded guilty to two felony charges and is hoping that by helping Mueller prosecute Manafort, he might receive probation despite the long list of additional crimes with which he has been charged. On the witness stand Tuesday, he sneaked a furtive glance at Manafort at a moment when his former boss was looking at his notes. In testimony, he stated that he had decided to come clean, but that Manafort had decided otherwise.
Some of Manafort’s associates now say they had predicted that greed would be his downfall. Blessed with extraordinary political instincts and his Georgetown law degree, Manafort built his political consultancy into a power center in Reagan-era Washington, where the name of Black, Manafort and Stone became synonymous with string-pulling, insider access and electoral success.
But along the way, many say, he became a mercenary, willing to serve brutal dictators and corrupt industrialists as long as they paid handsomely. Rita Levinson, an international lobbyist who worked for Manafort from 1985to 1995, said she initially accepted his explanation that he served strongmen to push them closer to Western democratic ideals. But “as time went on,” Levinson said in an interview, “it seemed to me, he became all about money, big money.”
The Russia-aligned oligarchs backing Viktor Yanukovych, the Ukrainian president whose rise to power Manafort helped stage-manage, provided big money for at least five years. But when a popular uprising forced Yanukovych from power in 2014 and that financial spigot shut off, the government claims, Manafort resorted to bank fraud rather than give up his lifestyle.
“Paul never believed that the rules applied to him,” said Levinson, who described him as “brilliant” in her 2016 memoir. “They were for others who couldn’t outsmart the system.”
A power player
Paul John Manafort Jr. was born in New Britain, Conn., about 12 miles from Hartford. He caught the political bug from his father, the town’s mayor, when P.J., as Paul was then known, was in high school. His father was indicted over accusations of perjury in a municipal corruption scandal in 1981 but never convicted.
As an undergraduate and then a law student at Georgetown University, Manafort gravitated toward Republican politics. By the time he married Kathleen Bond, a George Washington University graduate, in 1978, he had worked on Gerald Ford’s presidential campaign, and he would soon be hired by Ronald Reagan’s.
Tall, good-looking, with an authoritative air, Manafort thrived in political boiler rooms. But he distinguished himself even more as a lobbyist. He and two colleagues from his days with the Young Republicans and the Reagan campaign created two linked consulting firms that broke the mold in Washington, achieving legendary success. Shrewd and aggressive, Manafort, Charlie Black and Roger Stone helped elect politicians, then scored contracts to lobby those same politicians on behalf of businesses and foreign interests.
“After Reagan won the election, we started getting calls from people who wanted to know if we wanted to lobby,” Black said. “I didn’t think much of it,” he added, but Manafort “knew that it could be profitable.”
Manafort also began to indulge his expensive tastes. He was attracted to displays of “opulence,” Stone said. “Manafort thought that if something was expensive, it meant it was good.”
His partners objected to some of his business expenses, questioning his Concorde flights to Paris and suites at that city’s lavish Hôtel de Crillon.
In 1995, Manafort struck out on his own, focusing in part on clients in the former Soviet states where a clutch of oligarchs exercised control over entire industries. Washington seemed less hospitable. Manafort later told one associate that Karl Rove, the longtime Republican Party strategist, had “banished” him from the capital. In a 2016 memo seeking a position on Trump’s anti-establishment campaign, he cast his distance from the Republican elite as a positive.
By 2005, Manafort had forged bonds with two oligarchs in the former Soviet bloc. One was Oleg Deripaska, a Russian aluminum magnate who is close to President Vladimir Putin of Russia. One witness in Manafort’s trial testified that Deripaska lent Manafort $10 million in 2010, saying she saw no evidence it was ever repaid. Later, Deripaska sued him.
The other oligarch was Rinat Akhmetov, who with estimated assets of more than $12 billion was the richest man in Ukraine. At Akhmetov’s urging, Manafort agreed to try to engineer a political comeback for Yanukovych, a former coal trucking director, twice convicted of assault, who had lost a bid for the presidency in 2004.
In the words of federal prosecutors, Akhmetov and several other oligarchs backing Yanukovych became Manafort’s “golden goose.” Konstantin Kilimnik, a Russian citizen who prosecutors have said had ties to Russian intelligence, served as Manafort’s man on the ground in Kiev.
“Thank you for your unexpected generosity,” Manafort wrote to Yanukovych in an email with the subject line “bonuses” in 2010, the year Yanukovych became Ukraine’s president.
Prosecutors allege that between 2010 and 2014, Manafort was paid more than $60 million from his Ukrainian patrons and hid much of that income in secret foreign bank accounts in the names of 15 or more shell companies. He avoided paying taxes on at least $16.5 million of it, they allege. The remainder, they said, might be considered nontaxable business expenses, construed broadly enough to include $45,000 for cosmetic dentistry.
Manafort used his tax-free dollars, prosecutors have said, to support a lifestyle of staggering extravagance. In 2012 alone, he bought three homes.
Gates has testified that he helped Manafort conceal his true income, hiding the foreign bank accounts from his accountants and disguising several million dollars in income as nontaxable loans from companies Manafort secretly controlled.
At the same time, he admitted, he embezzled hundreds of thousands of dollars from Manafort’s accounts by falsifying his expense reports. A father of four, he suggested to others later that it seemed unfair that Manafort paid him an annual salary of $240,000 while raking in tens of millions.
For his part, Manafort seemed to trust Gates implicitly to handle both his business and personal finances. When he joined the Trump campaign in 2016, Manafort introduced Gates as “my deputy in the campaign” and “my deputy in my life.”
Money dries up
Yanukovych’s fall from power in Ukraine in 2014 was cataclysmic for Manafort. Even though the oligarchs regrouped to fund a new political party for which Manafort worked, the payments to him dwindled fast, and he complained about unpaid bills. When Gates told him in April 2015 about his estimated tax bill for the previous year’s earnings, he erupted in anger. “WTF,” Manafort demanded in an email. “How could I be blindsided like this.”
“This is to calm down Paul,” Kilimnik, the Russian aide in Ukraine, wrote to Gates in mid-2015 in an email that promised that $500,000 would be wired soon.
Ukrainian prosecutors had begun investigating the payments to Manafort and others, turning to the FBI for help. Agents interviewed both Manafort and Gates in 2014, but considered them only witnesses to the theft of Ukrainian government funds.
About the same time, Manafort’s family confronted him over an affair he was having with a much younger woman, whose rent and credit card bill they believed he was paying, according to interviews and text messages hacked from one of his daughters. He entered an Arizona clinic to try to put his life back together, texting his younger daughter that he had emerged with newfound self-awareness.
But prosecutors claim that his schemes continued. They say he and Gates kept accountants at two firms and officials at three banks busy with a round robin of made-up explanations and doctored financial records.
For example, Manafort had falsely reported $1.5 million in income from Ukraine as a loan to lower his tax bill. He then claimed the same nonexistent loan had been “forgiven” in order to inflate his income so banks would agree to lend to him.
Manafort’s deceptions grew increasingly convoluted throughout 2016, prosecutors say, but the Trump campaign appears to have been oblivious to that. Like nearly everyone else hired by the campaign, Manafort was not vetted. The recommendation of Tom Barrack Jr., a private equity investor who has been close to Trump for years, was enough. Also in his favor was Manafort’s offer to work at no charge, both because Trump is a notorious skinflint and because he apparently thought Trump would be more likely to hire a man of seeming great wealth like himself.
Manafort soon had plenty of detractors among the campaign staff. He won few points by calling Trump “Donald” in his first CNN appearance, as if he were Trump’s peer.
Some aides suggested he was unfamiliar with all the changes in politics — most notably the rise of the internet — since 1996, when he last worked on a U.S. presidential campaign. Others described him as lazy, carefully noting when he took off on Fridays for the Hamptons. Manafort said he had built a television studio at his home there so he could appear on Sunday talk shows remotely.
He lasted only five months, three of them as campaign chairman. When The New York Times revealed that a ledger found by Ukrainian investigators had listed $12.7 million in off-the-books cash payments to Manafort’s firm, one former campaign aide said Trump was enraged. But another article detailing how Manafort and others were begging Trump to stop picking public fights equally angered Trump. When Jared Kushner, the president’s son-in-law, told Manafort he was out, Trump was barely speaking to him.
By then, Manafort’s financial house of cards was on the verge of collapse. Less than two weeks after he left the campaign, one lender informed him that it had started to foreclose on his Brooklyn brownstone. He had paid cash for it when he was financially flush four years earlier, then borrowed $5.3 million against it that February. Five months had passed with no payments.
Gates managed to retain his affiliation to Trump as a liaison between the campaign and the Republican National Committee, although Trump disliked him so much that he was barred from flying on the candidate’s private plane. Manafort tried to use his lingering connection to Trump to land consulting work and to persuade banks to bail him out. He dangled a possible Cabinet secretary post in front of Stephen Calk, chairman of Federal Savings Bank in Chicago, pressing Gates to promote him as a possible secretary of the Army.
He continued to treat Gates as his aide, asking him how to convert profit-and-loss statements from PDF format into Word in order, prosecutors said, to inflate his income and appear more creditworthy to banks. After the election, Calk approved two loans to Manafort for a total of $16 million. Manafort used some of it to save his Brooklyn property from foreclosure.
But even Calk was getting worried. On Dec. 7, 2016, he wrote to another top bank official: “Nervousness is setting in.” Less than a year later, Mueller’s team filed the first of a series of indictments against Manafort. Mueller granted a plea deal to Gates and immunity from prosecution to five of the nearly dozen witnesses for the prosecution.
On Sunday, Manafort celebrated his 40th wedding anniversary in jail. He was allowed three visits limited to 30 minutes each. A notice on the website for his legal defense fund read: “Paul and his family are reaching out to anyone who can assist him at this time.”