Manafort indicted: Why ‘following the money’ looms large in Russia probe

Monetary transactions leave a tangible paper trail, which explains why tax-evasion charges may give Robert Mueller leverage in his investigation of alleged Trump-Russia ties. 

James Lawler Duggan/Reuters
Former Trump 2016 campaign chairman Paul Manafort leaves US Federal Court in Washington Oct. 30 after being arraigned on 12 federal charges in the investigation into alleged Russian meddling in the 2016 US presidential election.

Sooner or later, it comes down to money.

Even in the highest-profile cases, involving possible crimes by mobsters or political officials or even presidents, the flow of illegal money is usually involved.   

And that is why from Al Capone in 1931 to the Iran-Contra scandal in the 1980s to the Whitewater investigations in the 1990s, prosecutors have wielded tax-evasion charges with success.

In the current investigation into Russian meddling in the 2016 election, special counsel Robert Mueller is using the tax charges, along with money-laundering and other charges, not just to get justice, but as a lever to try to get former Trump campaign chairman Paul Manafort to cooperate with his investigation.

“There are lots of useful clubs” for the prosecutor, says Wes Oliver, a law professor at Duquesne University School of Law in Pittsburgh. “Does this one work? Sure!”

In this case, Mr. Mueller may have two levers: 1) a laundry list of charges that Mr. Manafort and his associate, Richard Gates, hid offshore accounts from tax officials and laundered the money in the United States to live a lavish lifestyle and 2) a bombshell revelation Monday that a low-level Trump campaign adviser who tried to set up a meeting with high-level Russian officials has pleaded guilty to making false statements to the FBI.  

Legal experts say the revelation about the adviser, George Papadopoulos, has potentially bigger implications for the investigation than the Manafort case, at least for the moment, because he probably has agreed to cooperate with investigators. And his testimony links Manafort to the Russia probe, although perhaps in a slightly more favorable light.

According to prosecutors, Mr. Papadopoulos’s idea of getting high-level Trump officials to the meeting was apparently quashed by Manafort, who nevertheless invited him to discuss the idea: “We need someone to communicate that DT [Donald Trump] is not doing these trips,” Manafort allegedly wrote in an email. “It should be someone low level in the campaign so as not to send any signal.”

Unlike the case against Papadopoulos, which goes toward the major question of whether the Trump campaign colluded with Russia during the election, the 12-count indictment against Manafort and his aide, Mr. Gates, is mostly based on financial actions that occurred before Manafort and Gates joined the Trump campaign.

The filing of such charges suggests that neither man has decided to cooperate so far, but finance experts say that remains a possibility.

"The tax evasion alone can carry a significant sentence," says Heather Lowe, legal counsel at Global Financial Integrity in Washington. Add in charges of conspiracy and money laundering, and "the potential here is for a lot of years [in prison], potentially decades."

That, she says, may give a powerful incentive for them to cooperate, if they have useful information to share.

If true, the allegations against Manafort and Gates are damning in their detail. The indictment charges that they acted as unregistered agents for the government of Ukraine, its Russian-backed president, and two pro-Russia political parties in Ukraine between 2006 and through at least 2016. They allegedly funneled $75 million through offshore accounts in Cyprus, the Grenadines, and Britain, and laundered more than $18 million of it in Manafort’s case and $3 million in Gates’s case to pay for personal expenses.

In Manafort’s case, it was a “lavish lifestyle,” according to the indictment. To avoid paying taxes, Manafort concealed the fact from his accountant and the Internal Revenue Service that he controlled the offshore accounts. Instead of payments going to him personally, he funneled more than $5.4 million to a home improvement company in the Hamptons of New York between 2008 and 2014; $1.3 million to a home automation, lighting, and entertainment company in Florida; and more than $900,000 to an antique rug store in Alexandria, Va.

He also bought two properties in New York City. Then he took out loans on them, according to the indictment, lying to the banks about the status of the property in order to get bigger loans.

Another part of the indictment charges that Manafort and Gates lobbied for pro-Russian entities in Ukraine by hiring and directing the activities of two Washington lobbying firms and reporting back their activities to Ukraine. But prosecutors say they hid their activities by concocting a cover story that they merely introduced the Ukrainians to the two companies. (It’s illegal to lobby for a foreign entity in the US without registering as an agent.)

Both men pleaded not guilty in court Monday.

Such allegations may represent the first of a slow drip-drip of indictments against various Trump campaign officials in the coming months. It’s a strategy commonly used in high-profile cases.

“Any prosecutor who thinks there was something improper done here doesn’t need to sell this to 12 jurors, they are needing to sell it to the American public,” says Mr. Oliver of Duquesne. So by letting citizens absorb the alleged misdeeds of each indictee over a period of months, the prosecutor can try to convince Americans the charges are fair.

In the meantime, the pressure grows on defendants to cooperate. It’s a time-tested tactic.

In the Iran-Contra affair during the Reagan administration, two people involved in the illegal transfer of money from Iran to Nicaragua agreed to lesser financially related charges in exchange for their cooperation with investigators. Thomas Clines, a retired CIA agent involved in the scheme, served a prison sentence for four counts of tax-evasion and other related charges. In the Whitewater investigation of the 1990s, prosecutor Ken Starr charged three Clinton associates with tax evasion and other related charges but all of them, including Arkansas Gov. Jim Guy Tucker, agreed to plead guilty or go to prison rather than cooperate with investigators.   

If Mueller takes his time making indictments public in the current case, the long period makes it harder for President Trump to issue pardons, because he can’t pardon people en masse. The fact that many of Manafort’s alleged misdeeds happened in New York further complicates a pardon because New York Attorney General Eric Schneiderman is working with Mueller’s team on the case.

Should Trump pardon Manafort on federal charges, the state could initiate its own charges, which are not subject to presidential pardon.

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