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Updates on the Criminal Tax Cases Against Ex-Trump Associates Paul Manafort and Rick Gates

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    If you read or watch the news, you have likely been following the high-profile criminal cases against Paul Manafort and Rick Gates, respectively former campaign manager and former campaign deputy chairman to President Donald Trump. Because the allegations – some of which were confirmed with guilty pleas – pertain to felony tax offenses, specifically failures to disclose foreign income, our criminal tax defense attorneys have been watching the legal developments closely. In this article, we offer an update on both defendants’ cases, which, like all those profiled in our tax blog, should remind readers of a simple but serious warning: violations of the U.S. Tax Code will catch up with you eventually, regardless of wealth or prestige. If you believe you have failed to report offshore income or assets properly, you should consult an criminal tax defense attorney immediately, as you could be facing debilitating fines – and potentially, years in federal prison.

    What Tax Crimes Were Manafort and Gates Charged With?

    In October 2017, Paul Manafort and Rick Gates were criminally charged on a dozen counts by U.S. Special Counsel Robert Mueller, a former FBI director best known for his pivotal role leading the controversial Special Counsel investigation into suspected Russian interference with the 2016 election. The ongoing investigation, which began in mid-2017, has garnered both ardent support and fierce opposition from both sides of the political aisle.

    On February 22, 2018, several months after the original 12-count indictment, both defendants were newly indicted by a federal grand jury in the Eastern District of Virginia. The latter indictment collectively charged the defendants with 32 new counts, separately from the charges filed in October.

    All of the charges are financial in nature (otherwise known as “white collar crimes”), and many pertain to taxes. Tax crimes charged in the second indictment included:

    • Five counts (1-5) of subscribing to false United States individual income tax returns, violating 26 U.S.C. § 7206(1) (fraud and false statements).
    • Five counts (6-10) of assisting in the preparation of false United States individual income tax returns, violating 26 U.S.C. § 7206(2).
    • Four counts (11-14) of failure to file Reports of Foreign Bank and Financial Accounts, otherwise known as failure to file an FBAR, violating 31 U.S. Code § 5314 (records and reports on foreign financial agency transactions).
    • Five additional counts (15-19) of subscribing to false United States individual income tax returns, violating 26 U.S.C. § 7206(1). Counts 1-5 applied to Manafort, while 15-19 applied to Gates.
    • One count (20) of subscribing to a false amended United States individual income tax return, violating 26 U.S.C. § 7206(1).
    • Three additional counts (21-23) of failing to file an FBAR. Counts 11-14 applied to Manafort, while 21-23 applied to Gates.

    Notably, the indictment alleges on page four that over $75 million “flowed through the offshore accounts.” Gates helped Manafort launder over $30 million, himself “obtaining more than $3,000,000 from the offshore accounts.” The indictment notes that this income was “concealed from the United States Department of the Treasury, the Department of Justice, and others.”

    The remaining nine counts, 24-32, involve charges of bank fraud and bank fraud conspiracy. The October charges, which are described on pages 23-29 of the original indictment linked above, made similar accusations, including failures to file FBAR, making false statements, conspiracy to launder money, and conspiracy against the United States.

    Gates Pleads Guilty, Manafort Pleads Not Guilty

    Gates made national headlines on February 23, 2018, when – after initially pleading not guilty to the charges in October – he pleaded guilty to (1) conspiracy and (2) making false statements as part of a plea deal with prosecutors. Gates, who pleaded guilty before U.S. District Judge Amy Jackson, faces anywhere from 57 to 71 months in prison, or slightly under five to six years, upon sentencing. However, his sentence may be shortened depending on the extent of his cooperation with prosecutors, who are continuing to investigate Manafort and others, such as Dutch attorney Alex van der Zwaan, a former associate of Gates and Manafort, who was fined $20,000 and sentenced to 30 days in prison after admitting in April to making false statements.

    Manafort and his attorneys have proven to be more steadfast opponents for prosecutors, disputing evidence and raising constitutional questions following raids, searches, and seizures by investigators. In a recent interview with CBS4 Miami, political consultant Roger Stone, who is best known for his work with Richard Nixon and later, Donald Trump, remarked of Manafort, “He’s feisty and combative and he’s not going to plead guilty. And he’s not going to roll over on this President.”

    If you’d like to follow this story from the beginning, our FBAR lawyers would direct you to the following articles, which provide additional details:

    Tax Evasion Lawyers Can Help You File an FBAR – and Avoid Criminal Penalties

    While it is easy to become distracted by the defendants’ connections to the President, the bottom line is that these types of charges could be filed against any taxpayer who has lied to investigators, made false statements on tax forms, or failed to report their U.S. or offshore income to the Internal Revenue Service (IRS). Moreover, with tax season presently in full swing, the IRS is primed to initiate a wave of civil audits – some of which will undoubtedly turn into IRS criminal investigations.

    If you are worried about a tax issue, such as an upcoming tax audit, failure to file taxes, failure to pay taxes, failure to file an FBAR, or other types of noncompliance, it is in your best interests to consult an experienced tax lawyer immediately. For a reduced-rate consultation with a tax evasion attorney serving California residents, out-of-state taxpayers, and expats, contact the Tax Law Offices of David W. Klasing online, or call our tax professionals at (800) 681-1295.

    Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.

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