Income was disguised to help Manafort, tax preparer says

ALEXANDRIA, Va. -- One of Paul Manafort's tax preparers admitted Friday she helped disguise $900,000 in foreign income as a loan in order to reduce the former Trump campaign chairman's tax burden.

The testimony of tax preparer Cindy Laporta came as prosecutors from special counsel Robert Mueller's office focused on the heart of their financial fraud case against Manafort, with jurors hearing testimony he inflated his business income by millions of dollars and concealed foreign bank accounts he was using to buy luxury items and pay personal expenses.

Manafort's defense has sought to blame any criminal conduct on his longtime deputy Rick Gates, while witnesses for the prosecution have testified Manafort was heavily involved in his own finances and personally directed Gates' actions.

On Friday, Laporta acknowledged she agreed under pressure from Gates during a conference call in September 2015 to alter a tax document for one of Manafort's businesses to show the $900,000 loan.

When Laporta and a colleague provided an assessment of how much tax Manafort would owe, Gates responded Manafort didn't have the money to pay it. After a back-and-forth discussion about how much income should be reclassified as a loan to aid Manafort, they settled on $900,000, she testified.

The result, Laporta said, was an altered tax payment Gates told her "could be paid by Mr. Manafort."

Laporta, who testified under a grant of immunity from prosecutors, said she knew what she did was "not appropriate," adding "you can't pick and choose what's a loan and what's income."

Asked why she engaged in misconduct, Laporta said she had few good choices.

"I could have called them liars," she said of Manafort and Gates. "But Mr. Manafort was a longtime client of the firm, and I didn't think I should do that."

That testimony is important as prosecutors try to rebut defense arguments Manafort can't be responsible for financial fraud because he left the details of his spending to others. Those others include Gates, who pleaded guilty earlier this year and is expected to testify soon as the government's star witness.

Most of the email evidence introduced Friday implicated Gates more directly than Manafort in a scheme to convert income into loans. But Manafort was copied in on several emails discussing the matter.

Laporta also described an effort by Manafort and Gates to falsify financial records to allow Manafort to obtain mortgage loans.

As late as August 2016 -- the same month he resigned from the Trump campaign -- Manafort was sending emails to Laporta asking her to alter a profit-and-loss statement for his company.

At that time, his company had not received any income in 2016, but Laporta testified Manafort directed her to reflect he expected to receive $2.4 million in income later that year.

Laporta said Manafort provided no documentation to back up the claim. Nevertheless, she wrote an email to loan officers saying the income would be received by November of that year.

It was one of several times Laporta testified she accepted questionable financial statements pressed on her by Gates or Manafort, including some involving other loans prosecutors say were shams to conceal income.

Manafort faces charges of bank fraud and tax evasion that could put him in prison for the rest of his life. It's the first courtroom test of Mueller's team, which is tasked with looking into Russia's efforts to interfere with the 2016 U.S. election and whether the Trump presidential campaign colluded with the Kremlin to sway voters.

In Friday's testimony, and throughout the trial thus far, neither Trump nor Russia has been discussed, as evidence has focused on Manafort's work as a consultant in the years before he joined Trump's campaign in the presidential year.

While the question of collusion remains unanswered, Manafort's financial fraud trial has exposed the secretive world of foreign lobbying that made him rich. It has also revealed how, when income from his Ukrainian political consulting work dried up, he struggled to pay his bills and, prosecutors say, began obtaining bank loans under false pretenses.

Laporta's testimony built on that of another of Manafort's accountants, Philip Ayliff, who told jurors Manafort denied on multiple occasions he controlled foreign bank accounts when asked. That's why the accounts weren't reported on years' worth of Manafort's tax returns as required by federal law, Ayliff said.

Ayliff also testified he sometimes communicated with Gates about the former Trump campaign chairman's personal and business tax returns. But he said Manafort authorized those discussions, and Gates and Manafort never contradicted each other.

In one instance, Ayliff testified Manafort pressed him to tell bankers considering a loan application one of Manafort's New York properties was being used as a personal residence when in fact he was using it to rent out. Classifying the property as a personal residence would have made it easier to obtain the mortgage at a low rate.

Ayliff responded to Manafort "we have always treated it as a rental. ... Not sure where that leaves us."

That email exchange occurred around the time prosecutors say Manafort was using doctored documents to secure loans including some papers a witness previously testified inflated his income by about $4 million.

The trial in northern Virginia is the first of two for Manafort. A second trial is scheduled for September in the District of Columbia. That case involves allegations he acted as an unregistered foreign agent for Ukrainian interests and made false statements to the U.S. government.