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On October 31, 2017, it was announced that Trump adviser Paul Manafort and his assistant Richard Gates were indicted in federal court on charges of conspiracy, tax fraud, and FBAR reporting felonies. These charges were some of the first arising from the investigation of the Russian government's interference in the 2016 U.S. presidential election. Find out the basis for these charges and what they mean for Manafort, Gates, and the Trump administration more generally.
According to the Information filed with the United States District Court for the District of Columbia, Donald Trump's former campaign chairman, Paul Manafort, and his assistant Richard Gates broke federal law while representing and lobbying on behalf of Viktor F. Yanukovych, the former President of Ukraine, and the Party of Regions. Manafort is said to have earned nearly $17 million in two years of work representing the Ukrainian political party, which had connections to the Kremlin.
Between 2006 and February 2017, the indictment alleges that Manafort and Gates were lobbying U.S. political figures on behalf of Ukraine and Yanukovych without disclosing their affiliations under the Foreign Agents Registration Act (FARA) or reporting the income they received for their work. Yanukovych was removed from his position in 2014, when tensions between Russia and Ukraine were high, but Manafort is said to have continued lobbying on behalf of the Party of Regions and a mouthpiece company known as the European Centre for a Modern Ukraine (the Centre). The indictment included charges for conspiracy, FARA violations, false statements, and violating federal income reporting laws.
Among the 12 charges included in the indictment were violations of the Bank Secrecy Act's Financial Bank Account Reporting (FBAR) requirements, and allegations that Manafort and Gates made false statements on their federal tax returns, violating the Foreign Account Tax Compliance Act (FATCA). Between 2008 and 2014, Manafort is said to have paid $12,000,000 in foreign funds to vendors for his own personal use including purchasing a condominium in Manhattan worth $2,850,000, renovating that property, and using false representations related to the occupancy of that property to apply for a loan. He did not pay income tax on these funds or report the foreign bank accounts they were paid from. The indictment says:
Manafort used his hidden overseas wealth to enjoy a lavish lifestyle in the United States without paying taxes on that income.
Manafort and Gates are each charged with having hidden foreign bank accounts and filing false tax returns regarding these accounts. The Internal Revenue Code requires taxpayers to disclose any foreign accounts with a balance over $10,000 at any point during the year. Manafort and Gates are said to have control over accounts in the United Kingdom, Cyprus, the Grenadines, and elsewhere, all connected to their work on behalf of the pro-Russian Ukrainian political party.
The Manafort-Gates indictment has been reported as part of F.B.I. special council, Robert S. Mueller III's investigation into the Russian government and the Trump Administration. Aaron S.J. Zelinsky, a prosecutor on the Mueller team, told the New York Times:
There's a large-scale, ongoing investigation of which this case is a small part.
The charges against Manafort and Gates do not directly implicate the Trump Administration in any collusion with Russia. If convicted, Manafort may be sentenced to up to 15 1/2 years in prison. Gates could face up to 12 1/2 years in prison. However, if either defendant chooses to strike a deal with the prosecutors to reduce these sentences, it could possibly result in more direct links between the Trump Administration and Manafort's international clients.
Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years experience. If you have questions regarding criminal consequences of tax fraud or FBAR violations, contact Joe Viola to schedule a consultation.