Manafort accountant testifies about suspicious loan

Paul Manafort and Rick Gates would provide documentation for a suspicious foreign loan, an accountant who prepared Mr. Manafort’s taxes.

Phillip Ayliff said a $1.5 million loan from an entity called Pernova Holdings raised a red flag because there was no documentation. But attempts to verify the loan’s terms were futile.

“There normally wasn’t a response, they just said it was a loan,” Mr. Ayliff testified.

Mr. Ayliff is a key witness for the prosecution in Mr. Manafort’s trial on bank and tax fraud.

Prosecutors for special counsel Robert Mueller have alleged Pernova Holdings was an overseas shell company used by Mr. Manafort to hide money he made in Ukraine from the IRS.

They have also accused Mr. Manafort of disguising income drawn from these accounts as loans to avoid paying taxes on it.

Mr. Ayliff said if Pernova Holdings was controlled by Mr. Manafort the money would be counted as income and, therefore, taxable.

He said Mr. Gates and Mr. Manafort took steps to hide Mr. Manafort’s alleged control of the entity.

“We thought it was an independent third party,” he said.

But in a possible disclosure likely to be seized upon by Mr. Manafort’s attorneys, Mr. Ayliff said he relied on Mr. Gates’ representation that there was no connection to Pernova Holdings.

Defense counsel said Tuesday that Mr. Gates was the mastermind behind the financial crimes that have been lodged against Mr. Manafort.