Manafort's right-hand man testifies against him in tax fraud case

AFP  Getty Images FILEPaul Manafort arrives for a hearing at U.S. District Court

AFP Getty Images FILEPaul Manafort arrives for a hearing at U.S. District Court

A day after testifying against longtime boss Paul Manafort, Rick Gates returned to the witness stand Tuesday as the government's star witness in the financial fraud trial of President Donald Trump's former campaign chairman.

Rick Gates dropped a bombshell in his testimony against his former business partner, Paul Manafort, in federal court Monday.

Gates, 46, is already facing up to five years in prison under the terms of a plea deal he struck with prosecutors in February when he pleaded guilty to two charges of conspiracy and lying to the Federal Bureau of Investigation.

Gates said he conspired with Manafort to falsify tax returns, knowingly failed to report foreign bank accounts and failed to register Manafort as a foreign agent.

He testified that "at Mr. Manafort's direction", he knowingly and deliberately violated USA tax law by failing to disclose assets held in 15 foreign bank accounts belonging to both him and Manafort to federal authorities.

He said he engaged in the wrongdoing at Mr Manafort's direction.

On day five of the trial in Alexandria, Virginia, Gates was asked by the prosecutor whether he had committed any crimes with Mr Manafort, and he said: "Yes".

During opening arguments last week, the defense team made it clear they intend to blame Gates, who handled some day-to-day business operations for Manafort, for numerous alleged reporting deficiencies Manafort is charged with.

Throughout his testimony, Mr Gates largely avoided making eye contact with Mr Manafort, who appeared to be watching him.

"Were you involved in criminal activity when you worked for Paul Manafort?" federal prosecutor Greg Andres asked the witness.

Those admissions are likely to become a focal point for Manafort's defence team when he is cross examined on Tuesday. One accounting trick saved Manafort $500,000 in taxes, she said.

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President Donald Trump calls the investigation a political "witch hunt", and has argued Mr Manafort is being treated worse than Al Capone.

Gates, Manafort's long-time business partner, is expected to face a tough cross-examination later on Tuesday by defense lawyers in the first trial to arise from Special Counsel Robert Mueller's investigation into Russian interference in the 2016 US election.

The jury has heard how Manafort made tens of millions of dollars for political work with pro-Russian politicians in Ukraine.

As well as serving as Manafort's right-hand man in their multimillion-dollar business, Gates was also Manafort's deputy on the Trump campaign.

Manafort's lawyers are expected to use the theft to try to undermine Gates' credibility as a witness.

His testimony is scheduled to continue on Tuesday.

On Friday, a tax preparer named Cindy Laporta admitted that she helped disguise $900,000 in foreign income as a loan to reduce Manafort's tax burden.

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.

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

Manafort, 69, meanwhile, is facing 18 felony charges that could carry a maximum of 30 years in prison. But while Laporta acknowledged that she regularly communicated with Gates, she said she believed Manafort was in the know.

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