Longtime Manafort deputy Rick Gates admits embezzlement

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

Rick Gates, a longtime business associate of President Trump's former campaign chairman Paul Manafort, has testified that he helped Mr Manafort file false tax returns and hide his foreign bank accounts.

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

Gates is cooperating with the investigation as part of a plea bargain with the prosecution, whilst Paul Manafort denies all charges- which include tax fraud; bank fraud; and failing to report foreign bank accounts.

Under cross examination, she said at the time she believed Manafort was directing Gates' actions and "knew what was going on".

In questioning Laporta on Monday, a prosecutor asked the accountant about a $US10 million loan purportedly received by Manafort from Russian businessman Oleg Deripaska in 2006.

Gates then admitted that he also turned the tables on Manafort - cheating him out of "several hundred thousand" dollars by submitting false expense reports that were paid out of some of the undisclosed foreign bank accounts in Cyprus.

He said millions of dollars had been concealed in foreign bank accounts, listing shell companies he and Manafort set up in places including Cyprus and the UK.

When asked, "Did you commit crimes with Mr. Manafort?" One accounting trick saved Manafort $US500,000 in taxes, she said.

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

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Special counsel Robert Mueller is investigating whether any Trump aides colluded with an alleged Moscow plot to help elect him as USA president, and whether there was any obstruction of justice.

Prosecutors allege he dodged taxes on millions of dollars he made from his work for a Russia-friendly Ukrainian political party. Gates also worked for the Trump election campaign.

Laporta detailed multiple examples in which Manafort and Gates sought to doctor financial records, first in order to lower Manafort's taxable income and then later to inflate his income so that he could get bank loans.

In court on Monday, Gates testified that he did steal from Manafort.

Testimony from Mr Manafort's tax preparer continued on Monday. "In reality, it was basically money moving between accounts", Gates said during his second day of testimony in the financial fraud trial of his former boss.

U.S. District Judge T.S. Ellis III, who has clashed with prosecutors as he urged them to hurry up presenting their case, has largely allowed the prosecution to question Gates uninterrupted. Gates joined Trump's campaign as deputy campaign manager in June 2016 and continued in other roles after Manafort was ousted. Previous evidence has indicated that Peranova, a company Gates said Manafort controlled, never loaned Manafort money.

Laporta said she had grown to distrust the information Gates was providing her, though she didn't know about the embezzlement. One accounting trick saved Manafort $500,000 in taxes, she said.

"Were you engaged in criminal activity during your time working for Mr. Manafort?"

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