Cindy LaPorta, a tax preparer and one of the witnesses granted immunity by the judge in Paul Manafort’s Virginia trial, testified Friday that she had concerns about representations made to her about details filed on a tax return for Manfort’s business.
She said she did not believe that a transaction classified as a loan was actually a loan as was represented to her but she filed the tax return reporting it as such anyway.
“I very much regret it,” she testified.
Manafort is facing charges of tax fraud and bank fraud. He has pleaded not guilty.
The government alleges that among his tactics was the use of “sham” loans that decreased his taxable income.
LaPorta, an accountant for Manafort’s tax preparation firm KWC, was questioned by prosecutor Uzo Asonye. He entered into the evidence the grant of the immunity from the judge, and she testified that had she not had immunity she might be prosecuted.
She went on to testify about discussions that she, another KWC employee Conor O’Brien, and Manafort’s longtime business deputy Rick Gates had about a tax return they were filing for Manafort’s international consulting business in 2015. Gates hashed a plea deal with special counsel Robert Mueller earlier this year, and will be called to testify later in the ongoing Manafort trial, the prosecutors have said.
On a conference call the KWC accountants had with Gates about preparing the 2014 return, they provided him with an estimate of the taxes that would be due for the business.
“Rick said it was too high, he didn’t have the money,” LaPorta said, going on to clarify that the “he” Gates was referring to was Manafort.
Asonye questioned LaPorta about a ledger, assembled by Manafort’s bookkeeper for his business, showing that his business had earned $5 million from an entity called Telmar. LaPorta testified that she believed Telmar to be a client of Manafort’s consulting business.
LaPorta said that on the conference call the KWC accountants and Gates discussed a proposal to change the amount of a loan reported from Telmar. Reporting more of the income as a loan would reduce Manafort’s taxable income, she testified, and therefore reduce the taxes he owed.
They ultimately changed the amount of the loan to $900,000 which LaPorta said resulted in an amount of taxes due that could be paid by Manafort. LaPorta testified that by shrinking Manafort’s income, the taxes due were reduced by $400,000 or $500,000. Asonye also entered into evidence emails between Gates and O’Conor discussing changing the loan agreement connected to the loan.
LaPorta said that the conduct was not “appropriate” because “we can’t pick and choose what is a loan and what is income.” She said she thought it was wrong and could have made her firm vulnerable to litigation.
The following year an additional $1 million in income from Telmar was represented on the 2015 general ledger as a loan. Gates confirmed in an email exhibited during her testimony that the $1 million should be classified as a loan and not as income.
Gates, in another email displayed by prosecutors, promised her underlying docs related to the $1.9 million in loans — which he said were three separate loans — but LaPorta testified that she never saw them.
Prosecutors also exhibited emails showing Manafort had been forward emails between Gates and the accountants discussing the Telmar loan.
Why she was immunized: otherwise she would have taken the 5th since this is clearly self-incrimination for a tax preparer.
…she had concerns about representations made to her about details filed on a tax return for Paul Manfort’s business.
Now, just imagine the concerns we have about the representations made to all of us about the details filed on tax returns for Donald Trump’s business.
Well the question on that is how would she have taken action? Would she have been correct in performing her own inquiry? Would she have enough to send to say the feds and report a crime. What were her liabilities in that situation. I am sort of trying to imagine the head space at the time.
This is why they pay tax preparers the big bucks (not). Their signature is at the bottom of the return. They can claim they were furnished false information, but that defense only goes so far.
And on the other hand, if you basically do an audit on every client before you prepare the return, you’re not going to have a job for long.
And yet she filed them anyhow. Why not walk away: “I am sorry, I can’t file these as it currently stands.”
Not to get all moralistic - but this is how fraud becomes more widespread.